Thursday, June 7, 2012

Sustainable development, trade and WTO

The next United Nations Conference on Sustainable Development popularly known as the Rio+ 20 Summit is scheduled in June 2012 in Brazil. The objectives of the Conference are to secure renewed political commitment for sustainable development, assess progress to date and remaining gaps in the implementation of the outcomes of the major summits on sustainable development, and address new and emerging challenges.The Rio+20 Conference will have two themes:  a green economy in the context of sustainable development and poverty eradication; and the institutional framework for sustainable development.

The complex relationship of trade and sustainable development throw up myriad questions. What is the relation of international trade and sustainable development? Are they compatible or conflicting? Do international trade rules have a negative impact on achieving sustainable development? Are the goals of a greener economy in conflict with multilateral trade rules? Can the goal of sustainable development be achieved within the confines of existing multilateral rules? Does trade have a positive or negative impact on sustainable development? Do multilateral trade rules as they exist hinder adoption of greener technologies for a greener planet? Are globalisation and sustainable development irreconcilable? This blogpiece in Trade and Environment Nexus captures the relationship rather well.

The WTO has prepared a brochure titled "Harnessing trade for sustainable development and a green economy" that portrays the relationship between trade and sustainable development. It argues that the existing multilateral rules has sufficient domestic policy space for members to pursue agendas in the interest of the environment as long as they are non-discriminatory and not a disguised form of protection. Detailing out the provisions in the WTO Agreements that enhance the protection of the environment, it states:
" WTO disciplines relevant to the environment

There is always the concern that certain measures taken to achieve environmental protection goals may, by their nature, restrict trade and thereby impact on the WTO rights of other members. This is why exceptions such as GATT Article XX are important (the General Agreement on Tariffs and Trade is the core WTO agreement relating to trade in goods). GATT Article XX on General Exceptions lays out a number of specific instances in which members’ trade measures may be exempted from GATT rules that would otherwise have applied. The provision seeks, among other things, to ensure that environmental measures are not applied arbitrarily and are not used as disguised protectionism.

Rules such as the WTO Agreement on Technical Barriers to Trade (which deals with technical requirements) and the WTO Agreement on the Application of Sanitary and Phytosanitary Measures (dealing with food safety and animal and plant health) provide scope for WTO members to put in place regulatory measures to protect the environment and advance a green economy, while at the same time imposing disciplines to ensure such measures are not unnecessary restrictions on international trade.

The WTO Agreement on Subsidies and Countervailing Measures seeks to prevent members from providing subsidies that distort international trade. Provided certain basic disciplines are respected, the agreement leaves members with policy space for, among other things, supporting the deployment and diffusion of green technologies.

The WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) provides a framework for applying the intellectual property system to promote access to and dissemination of green technologies, and provides policy space to promote public interest in sectors of vital importance to socio-economic and technological development, as well as specific incentives for technology transfer and exclusions of environmentally damaging technologies from intellectual property (IP) protection. 

The plurilateral  WTO Agreement on Government Procurement  aims at opening up procurement markets to international competition on a transparent and non-discriminatory basis. Under the agreement, parties and their procuring entities may prepare, adopt or apply technical specifications aimed at promoting green procurement. 

In the 2001 WTO Doha Ministerial Declaration, Ministers recognized that “…under WTO rules no country should be prevented from taking measures for the protection of human, animal or plant life or health, or of the environment at the levels it considers appropriate, subject to the requirement that they are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade, and are otherwise in accordance with the provisions of the WTO Agreements.” (The language, which is drawn from GATT Article XX, can also be found in Principle 12 of the Rio Declaration: “Trade policy measures for environmental purposes should not constitute a means of arbitrary or unjustifiable discrimination or a disguised restriction on international trade.” ..."
Regarding various support programmes that many countries offer to encourage greener technology, the report seemed to suggest that there is sufficient room for members to implement domestic priorities subject to certain ground rules.
"The key WTO instrument governing support programmes is the Agreement on Subsidies and Countervailing Measures (SCM Agreement). In addition, the WTO Agreement on Agriculture contains a category of permissible green subsidies, known as Green Box, which could allow countries to pursue green economy policies in agriculture. The SCM Agreement aims to strike a balance between the concern that domestic industries should not be put at an unfair disadvantage by competition from foreign goods benefiting from government subsidies, and the concern that countervailing measures to offset those subsidies should not themselves be obstacles to fair trade. The rules of the SCM Agreement define the concept of “subsidy”, establish the conditions under which WTO members can use subsidies, and regulate the remedies (countervailing duties) that may be taken against subsidized imports. Provided certain rules are respected, the Agreement leaves members room to encourage green technologies."
The Report seemed to suggest that there is sufficient room within the WTO rules to pursue domestic, green agenda as long as they do not violate the basic principles of non-discrimination and disguised protectionism. However, is it as simple as that? Often interpretation of legal principles and actual progams are extremely complex exercises. This leads to ambiguity in understanding of the scope and impact of the provisions as well as the legality of the measures. The interpretation of the SCM Agreement often hinges on the definition of a subsidy and its adverse impact. It is also difficult to assess if a measure is genuinely in the interest of the environment or a disguised protectionist measure. Domestic policy choice is often questioned and the trend is to challenge the measure in the DSM. The relationship of the protection of the environment and pursuance of non-discriminatory trade is often a tenuous and fragile relationship. 

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