WORLD TRADE
ORGANIZATIONWT/CTE/W/162
10 October 2000
(00-4157)
Committee on Trade and Environment Original:  English
ITEM 1:  THE RELATIONSHIP BETWEEN THE PROVISIONS OF THE MULTILATERAL
TRADING SYSTEM AND TRADE MEASURES FOR ENVIRONMENTAL PURPOSES,
INCLUDING THOSE PURSUANT TO MULTILATERAL
ENVIRONMENTAL AGREEMENTS
Communication from New Zealand
I. INTRODUCTION
1. There has been a series of exchanges and numerous detailed written contributions on Item 1,
"the relationship between the provisions of the multilateral trading system and trade measures for
environmental purposes, including those pursuant to Multilateral Environmental Agreements" on the
Committee on Trade and Environment’s (CTE) agenda.  New Zealand has participated actively inthese exchanges and, drawing on previous analysis and discussion both in the CTE and elsewhere, we
offer some further observations which might help to focus future discussions.
II. DEVELOPING A BETTER UNDERSTANDING OF THE RELATIONSHIP
BETWEEN MEAs AND THE WTO
2. There are approximately 200 Multilateral Environmental Agreements (MEAs) currently in
force.  Of these, only 20 contain trade provisions, with two categories - protection of fauna and flora
and biosecurity regulation - accounting for more than half of these provisions.
3. Environmental considerations are reflected in a number of WTO instruments, most directly
(though not only) in GATT 1994 (e.g. Article X(g)).  Indeed, there is now a better understanding
among WTO Members, whether or not they are party to an MEA, that considerable scope does exist
for the use of trade measures for non-trade objectives , for example, to conserve "exhaustible natural
resources".  Such measures, however, are not permitted to be applied in a way that constitutesarbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a
disguised restriction on trade.
4. Given, therefore, that Article XX of the GATT 1994 permits certain policies and practices,
which would otherwise be inconsistent with the WTO Agreements as "exceptions", it is important to
identify the areas where there could potentially be a conflict between this provision and trademeasures applied through an MEA.  It should be noted that, in New Zealand’s view, where MEAs
have specifically mandated the Parties to take specific action against each other in certain
circumstances, the normal rules of international law and treaty interpretation would provide little
room for a party to such Agreements to contest the legality of the measures on WTO grounds.  In
sum, therefore, questions about the potential conflict between WTO provisions and MEAs are limited.Indeed, in New Zealand’s view, they are only likely to arise where the provisions of an MEA are
unclear as to the action they mandate, even among the Parties to it, or in situations where the Parties
to an MEA are applying trade measures against a non-party.  This is a tightly circumscribed area and
it is important, therefore, not to exaggerate the likelihood of difficulties between the WTO
Agreements and MEAs.WT/CTE/W/162
Page 2
5. It appears to New Zealand that there are essentially two main areas where questions may
arise.  These are:
− The use of trade-related measures to protect environmental resources which are
outside the jurisdiction of the country applying the measures;  and
− the discriminatory application of trade measures, including provisions which apply
differently to non-members of an MEA or other international agreements.
6. A further question may arise over the reference in Article XX to "measures necessary."  This
may allow Members of the WTO to question measures applied under an MEA which they consider to
be "unnecessary."
7. In the specific context of MEAs, potential conflicts could be avoided by encouraging the clear
drafting of trade-related provisions with a view to avoiding disputes.  In addition, a robust dispute
settlement system within MEAs could play a key role in resolving differences among Parties.  Assuggested by Canada, the development of general principles and criteria could also assist negotiators
in the use of trade measures within MEAs. This, however, leaves the problem of MEAs currently in
force which retain vague provisions, as well as the two categories of potential conflict identified in
paragraph five above.
8. In light of the potential use of unilateral measures, it may be helpful to consider the findings
of the Appellate Body which considered the meanin g of both Article XX(g) and the chapeau to that
Article in the case of United States - Import Prohibition of  Certain Shrimp and Shrimp Products.
1  
The Appellate Body in that case recognized the importance of protecting and preserving the
environment, but also made clear that in adopting policies aimed at protecting the environment,
WTO Members must fulfil their obligations and respect the rights of other Members underthe WTO Agreement.
2   It held that a measure which was on its face fair and just could nevertheless be
applied  in an arbitrary or unjustifiable manner.3   On the facts of that case it found that, among other
things, a failure to have prior recourse to diplom acy as an instrument of environmental protection
policy resulted in a unilateralism which was discriminatory and unjustifiable, and that a rigid and
inflexible application of the measure in question resulted in arbitrary discrimination.4  
III. A SUGGESTED APPROACH
9. Multilateral cooperation and agreement to address global or regional environmental
objectives clearly remains fundamental to the achievement of lasting solutions.  Accordingly, trade
measures taken unilaterally to address an environmental problem outside the jurisdiction of an
importing country should, in general, be avoided.  Indeed, the effectiveness of such a unilateralinstrument needs to be considered carefully agains t its apparent attractiveness.  Will the measure
affect a change in the other country’s policies?  Such measures may lend themselves to protectionist
abuse and have the effect of interfering with countries’ ability to exercise their sovereign right to
determine their own environmental policies.  All of this reflects the point that trade measures are
seldom the first best policy tools to achieve environmental objectives.
5  
                                                     
1 WT/DS58/AB/R, 12 October 1998.
2 Paragraph 186.
3 Paragraph 160.
4 Paragraphs 172 and 177.
5 An exception to this principle is the Convention on International Trade in Endangered Species of
Flora and Fauna (CITES).  This Convention was established to regulate and document international trade inendangered species.  CITES provides for consultation on trade measures prior to implementation.  The
Convention has successfully applied trade measures for over 30,000 endangered species.WT/CTE/W/162
Page 3
10. New Zealand is conscious of the difficulties inherent in adapting a "one-size-fits-all"
approach to the establishment of rules designed to facilitate the clarification of the relationship
between MEAs and the WTO Agreements.  For this reason, New Zealand favours a more flexible
approach to the matter.  In this context, New Zeal and considers that, before a decision to apply a trade
measure is taken, it is important that consultation with the country or countries on which the trademeasure is to be applied is undertaken. Such a consultative process could assist in providing the
countries involved with an opportunity to  consider a range of policy instruments suitable to resolve
the specific environmental issue which has arisen.  The principle behind the establishment of a
consultative process, therefore, is to maximize the potential for an agreed solution, to minimize
conflicts between parties on trade and environment related policies while at the same time avoiding
inefficient environmental and economic outcomes.
11. To guide the consultative process between the parties, it is this paper’s contention that first-
best theory could be used.  This is not a new approach.  The exceptions in GATT Article XX, for
instance, address situations where negative externalities need to be remedied.  A first best approach is
important because it can address the division between the private and the social cost at the source.
6  It
ensures that global/national environmental concerns are met in a manner that is consistent with
global/national trade concerns.
12. The first best instrument in a particular case will always be the least distortive and most
efficient measure which can achieve a particular result.  In the case of a dispute, for instance, a first
best outcome which might be arrived at through a consultative process may be the transfer of
technology.  The transfer of equipment may ach ieve the primary objective, i.e. protect the
environment, avoid a costly (in political and economic terms for all parties) dispute settlement caseand thereby prevent the unilateral application of trade measures.  If the transfer of technology was
assessed as the first-best solution, but despite this a party pressed ahead with a unilateral trade
measure, then it would be required to explain the reasons behind its rejection of a preferred
instrument.
13. It should be emphasized that New Zealand does not believe that a consultative mechanism in
and of itself would guarantee the delivery of an acceptable solution to all parties at all times.  Rather,
New Zealand considers that the establishment of such a mechanism may help to facilitate an improved
understanding of different points of view and allow for the identification of a range of different policy
options.  In particular, a substantive and meaningful engagement by countries in a consultative
process designed to identify first best policy options is likely to reduce the potential for discriminatory
or arbitrary measures.
14. At the broader level of trade and environment policy, a further development which
New Zealand supports is the establishment of an informal mechanism for dialogue to discuss and
exchange information on trade and environment issues.  This could involve, inter alia , UNEP, the
WTO and MEA Secretariats, the members of these organisations as well as NGOs and industry.  Such
a mechanism would allow interested parties to develop a better understanding of trade and
environment-related issues, in a forum which is not mandated to negotiate rules but is rather aimed atpreventing conflict and improving cooperation and coordination amongst policy makers.  Importantly,
perhaps, this could be seen as a confidence-building measure that would respect the different
negotiating roles of both trade and environment organisations, and aim at ensuring that potential
                                                     
6 In a simplified situation in which there are just two goods and an initial allocation of these goods
between two individuals, if it is possible for a realloca tion of these goods to take place, whereby one individual
gains in satisfaction whilst the other is no worse off, then this change in distribution meets the first-bestcriterion.WT/CTE/W/162
Page 4
questions or problems are identified and addressed at an early stage.  The general aim would be to
promote the mutually supportive role of trade and environment efforts.
15. The approach outlined above is provided to help focus future discussion of the utility of
consultation as a means for the identification of alternative and least trade restrictive policies.
Consultation is an important element, not only in respect of unilateral measures, but also in thecontext of MEAs.  In this latter regard, New Z ealand would note that some MEAs already contain
detailed consultative mechanisms, such as the Montreal Protocol.  We would further note that under
some WTO Agreements, such as the Agreement on Technical Barriers to Trade, Members are
required to notify and consult on draft technical regulations.  These can include regulatory actions
taken pursuant to MEAs.
IV. CONCLUSION
16. The negotiation of MEAs remains an essential mechanism through which countries can
address environment objectives.  It is also recognized that trade measures will continue to be a feature
of some MEAs and that therefore it is important to further develop our understanding of the
relationship between such Agreements and WTO rules. While the range of potential conflicts between
MEAs and the WTO Agreements is tightly circumscribed, questions will continue to arise when
provisions of an MEA are unclear as to the action they mandate, even among the Parties to it, or insituations where the Parties to an MEA are applying trade measures against a non-party.
17. In the context of these observations, New Zealand suggests that the following issues could be
usefully explored further:
− Encouraging the clear drafting of future trade-related provisions in MEAs as well as
robust dispute settlement systems;
− considering the contribution that consultative mechanisms guided by first best
principles developed within an MEA can make, including through ongoing exchangeof experience with MEA Secretariats;  and
− establishing an informal mechanism for a broader dialogue on the issues raised
regarding the relationship between MEAs and WTO rules, which could include
participation by WTO, UNEP, MEA Secretariats and members, as well as NGOs andindustry.
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