WORLD TRADE  
ORGANIZATION  RESTRICTED  
 WT/CTE/M/17  
9 April 1998  
 (98-1467)  
  Committee on Trade and Environment   
 
 
 
REPORT OF THE MEETING HELD ON 19 -20 MARCH 1998  
Note by the Secretariat  
1. The Committee on Trade and Environment (CTE) met on 19 -20 Ma rch 1998 under the 
chairmanship of Ambassador C.M. See of Singapore.  The agenda in WT O/AIR/790 was adopted.  
Observer status for international intergovernmental organizations  
2. The CTE agreed  to extend observer status to the World Intellectual Property Or ganization.  
Work programme and schedule of meetings for 1998  
3. The CTE adopted  its work programme and schedule of meetings for 1998 (see Annex).  
4. The Chairman  said his general objectives this year will be to further the Committee's analysis 
of all  item s on the work programme and to increase an understanding of the problems the CTE was 
dealing with.  The Chairman also felt it was important to continue to broaden the participation in 
support of the analysis of the CTE by inviting representatives of Secret ariats of those multilateral 
environmental agreements (MEAs) relevant to the work of the CTE to inform the Committee of 
relevant developments in their respective agreements.  Finally, the CTE would produce a report to the 
General Council at the end of the year.  In preparation for the Information Session with selected MEA 
Secretariats at the 23 -24 July meeting, the Chairman invited Members to inform the Secretariat of 
those MEAs which they considered could most usefully be invited to participate.  
5. The Cha irman, on behalf of the CTE, congratulated the WTO Secretariat on its successful 
organization of the NGO Symposium on Trade, Environment and Sustainable Development on 
17-18 March.  
6. The Deputy Director -General of the WTO  commented on the NGO Symposium on  Trade, 
Environment and Sustainable Development which had been attended by approximately 
150 non-governmental organizations (NGOs).  The opening session had involved the participation of 
the Director -General of the WTO, the Secretary General of UNCTAD, the  Executive Secretary of 
UNEP and the Deputy Administrator of UNDP.  The Symposium had provided a unique opportunity 
for NGOs and representatives of international organizations to discuss informally their views in the 
presence of WTO Members.  A number of u seful suggestions had been made for any future event, 
including the nature of participation, issues to be addressed, format for discussion and possible 
outcomes.  The Director -General had closed the meeting expressing his satisfaction with respect to the 
debate which had taken place, the participation of NGOs and particularly the fact that such a large 
number of governments had been present throughout the proceedings.  The Deputy  Director -General 
thanked those Member governments whose financial contribution s had made the Symposium possible 
and said the Secretariat would continue to build on its cooperation with representatives of the NGO 
community.  
7. The representative of the European Communities  recalled that the EC was one of the 
proponents behind the est ablishment of the CTE.  The history of the CTE was well known, although WT/CTE/M/17  
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in comparison to its parent organization, soon to be 50, it was still rather young.  Since the 1996 
Ministerial Conference, the work of the Committee had followed a more analytical pat h.  Like many 
Members, the EC felt the work of the Committee to analyse the items on its agenda had been 
constructive, but the May  Ministerial Conference would provide an opportune moment to reflect on 
where the CTE was and how to proceed thereafter.  Such  reflection was all the more necessary given 
the statements at the NGO Symposium on 17 -18 March.  The EC and its Member States had 
participated with great interest and listened carefully to the comments made by the speakers, 
particularly from participating  NGOs.  The EC had been impressed by the widespread feeling among 
the speakers that so far the CTE had not delivered.  There had been numerous calls for the CTE to be 
revitalized.  It was especially telling that the WTO Director -General had not hidden his critical 
evaluation and disappointment with the lack of concrete results achieved so far.  The EC was prepared 
to contribute unreservedly to such an important exercise and had given some thought to how this 
could be done.  
8. The EC believed the trade and e nvironment axis should become central to the work of the 
WTO in all its aspects as the trade and environment debate had to be brought more into the WTO 
mainstream.  In fact, experience and academic study since the end of the Uruguay Round continued to 
bolster the view that trade and environment could be mutually supportive towards the aim of 
achieving sustainable development, in particular through a proper and oriented synergy between 
global liberalization and a high level of environmental protection.  The EC felt there were important 
deadlines ahead, including the next two  Ministerial Conferences, and the trade and environment 
interface would receive increasing attention.  Not only was there much work for the WTO to do on the 
environment front, it seemed  l ikely that for any major new package of WTO agreements to be 
adopted and implemented in the decades ahead, it would be essential to have the support of the 
environment and sustainable development communities in both developing and developed countries.  
9. The environmental benefits of removing trade restrictions had been a significant element in 
the Committee's debates so far.  This topic was an important item on the work programme of the CTE 
but, in the EC's view, it was essential to devote a similar level of attention to the MEA cluster and to 
the linkages between clusters.  All economic sectors examined in WT/CTE/W/67 and its addendum,  
were relevant not only to CTE work but also to that of the WTO in general.  In any future global 
package, all such sector s would be covered, but the EC was determined to ensure that environment 
related issues would also be given due weight as a horizontal element to be taken into consideration in 
all areas.  The CTE could thus identify and examine practical ways in which the  trade and 
environment interface could result in "win -win" situations.  Such analyses would make a significant 
contribution to helping meet the provisions and expectations as regards capacity building in, and the 
transfer of technologies to developing coun tries, an aim embedded in many MEAs.  The EC felt 
proper attention had to be given to environmental concerns throughout the work of the WTO;  in due 
course, and certainly before the 1999 WTO Ministerial, it would be useful, under the auspices of the 
WTO an d possibly in cooperation with other international organizations, to strengthen the dialogue 
between top -level trade and environment policy makers in order to push forward the process by which 
the CTE debate became relevant to broader WTO decision -making.  This would require a willingness 
on the part of all concerned to focus the dialogue on the relevant topics so that the debate and the 
analyses could move forward.  
10. The representative of India  assured the Chairman of India's support for the important wo rk 
that lay ahead for the CTE in 1998.  All ten Items of the work programme were equally important and 
relevant to the mandate of the CTE.  India thanked Ambassador Ekblom of Finland for the significant 
work that had been undertaken in the CTE under his ch airmanship in 1997.  Since its creation in 1995, 
the CTE had carried out significant work, the 1996 Report of the CTE, adopted by Ministers in 
Singapore, was an example of its vitality.  India felt that CTE work and the expectations that were 
reposed in it  had been unanimously agreed in 1996 when the CTE was made a WTO Standing Body;  
its work and Members' expectations for this work had to be consistent with that of other WTO 
Standing Bodies.  The complex issues the CTE was addressing had to be viewed in li ght of the  WT/CT E/M/17  
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primary function of the CTE as a WTO Standing Body, which was to uphold the integrity of the 
multilateral trading system.  
11. The representative Japan  asked that informal CTE meetings be organized to enrich the debate.  
Like the EC, Japan felt M EAs were important and the balance between MEAs and market access 
should be maintained.  The ad hoc  dialogue with NGOs was also important.  
12. The representative of Argentina  expressed his delegation's satisfaction with the organization 
of the NGO Symposiu m. 
13. The representative of Norway  said the NGO Symposium had underlined the need for further 
dialogue with NGOs.  As noted by the EC, trade and environment would receive increased attention 
due to the upcoming Ministerial Conferences.  In this context, t he role of the CTE may need to be 
reworked.  In addition to the CTE, other WTO Bodies and future negotiations in the WTO should take 
environmental aspects into consideration where appropriate.  
14. The CTE expressed  its appreciation for the leadership provi ded by Ambassador B. Ekblom of 
Finland during his chairmanship of the CTE in 1997.  
Item 6   The effects of environmental measures on market access, especially in relation to 
developing countries, in particular to the least developed among them, and 
environm ental benefits of removing trade restrictions and distortions  
Sectoral analysis  
15. The Chairman  recalled that the focus of the meeting was on the Items of the work programme 
related to the cluster of market access and that agreement had been reached to un dertake a sectoral 
discussion of Item 6 based on relevant national submissions and Secretariat documentation.  Each 
sector would be dealt with in the order presented in WT/CTE/W/67 and its addendum, namely 
agriculture, energy, fisheries, forestry, non -ferrous metals, textiles and clothing, leather, and 
environmental services.  
Agriculture  
16. The representative of Argentina  said that according to the World Bank, among the most 
powerful policies to improve environmental management were those that used the mar ket and price 
signals to make appropriate allocation of resources.  Environmental resources (e.g., land, water, 
biodiversity, fisheries) were typically underpriced in two ways:  (a) by subsidies that actually reduced 
the cost of overexploiting or polluting  the environment;  (b) by the failure of markets that normally 
tended to reflect only the private costs of production, ignoring the damages inflicted on others by 
pollution and depletion of natural resources.  Therefore, ensuring that growth and sustainabl e 
development were compatible required a two step reform:  (a) moving towards free market prices, i.e. 
prices that reflected the full private marginal cost of production;  and (b) moving beyond free market 
prices, in order to allow prices to reflect the fu ll costs of production.  Consequently, subsidy removal 
was only a first step towards sustainable development, but it was an indispensable one.  Given the 
global market, this should be a coordinated policy.  Isolated markets were theoretical constructs.  
Developed countries, particularly the richest among them, were the only ones that could heavily 
subsidize production and exports.  In so doing, they were not only allocating internal budgetary 
resources and forcing their consumers to pay a hidden tax, but th ey were also distorting international 
prices.  
17. The representative of Argentina said that according to the OECD, in 1987 the level of 
agricultural support in OECD countries was about US$280  billion.  This level of support was highly WT/CTE/M/17  
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concentrated in a ver y few of the OECD countries and was one of the most distortive, inefficient and 
non transparent ways of support:  market price support.  According to OECD, only 20 per  cent of the 
US$280  billion spent during 1987 went to the farmers, the rest was capitaliz ed into land values and 
captured by input suppliers.  In highly intensive agricultural practices this meant more fertilizers, 
herbicides, pesticides, energy, irrigation, and accordingly, more environmental degradation.  The 
representative enquired as to wh at this meant for the global environment and for food security and 
sustainable development of non -OECD countries.  Whenever a wealthy government decided to 
subsidize agricultural production and exports, it was encouraging new investments in that sector and  
consequently preventing those investments to go elsewhere, such as to developing countries where 
agricultural production was less intensive and where poverty, particularly rural poverty, was 
responsible for environmental degradation.  Moreover, developing  countries had no way of 
introducing sound environmental reforms if this irresponsible policy continued.  He asked how would 
an agricultural producer be required to stop soil degradation and to shift to environmentally friendly 
ways of farming, when actual ly overexploiting and reducing the stock of his natural capital might be 
the only alternative to bankruptcy.  
18. In Argentina's view, prices should reflect environmental costs of production.  This had been 
agreed to by all countries at the Rio Earth Summit .  This could not occur if prices did not even reflect 
private production costs.  Previously, government interventions affected national efficiency and 
resulted in local environmental damage;  this situation had changed.  Goods (except for agricultural 
products), capital and technology could flow almost freely through the global market.  Today 
countries were more interdependent and agricultural subsidies, among other subsidies, had harmful 
global effects.  The representative asked how efforts could be coord inated to solve this situation.  
Future agricultural negotiations after 1999 would offer an opportunity to ensure cooperation to harvest 
gains both in terms of economic and environmental efficiency.  This would represent a genuine "win -
win" situation for t he local and global environment.  When a farmer decided how much of input was 
needed, such as fertilizers, pesticides, herbicides or irrigation water, he considered both the expected 
benefit and input costs.  Since most OECD countries' agricultural subsidi es were provided through 
price support policies, farmers used inputs until the marginal return obtained from using an additional 
unit of the input equalled its cost.  If prices were supported, returns increased, which increased input 
use.  Removing subsidi es was thus a first step to ensuring that environmentally damaging inputs were 
used in a socially optimal way as set out in a World Bank publication.  
19. In Argentina's view, removing subsidies was also necessary to get prices right.  Healthy prices 
needed  to reflect private and social costs of production.  Prices portrayed a message that dealt with the 
scarcity of natural resources involved in production and determined decisions made by investors, 
producers and consumers.  Some governmental policies such a s subsidies distorted prices and 
negatively affected decisions on investment, production methods, international trade and consumption 
patterns.  As a result economic efficiency, international trade and environment all suffered.  Argentina 
was not trying to  suggest that if countries responsible for these practices removed subsidies which 
encouraged production and exports it would necessarily result in socially optimal outcomes.  These 
countries would also need to go beyond the market, namely to cope with mar ket failures and create 
incentives to account for environmental externalities.  The process had to begin somewhere and the 
best place to begin was by eliminating those subsidies that prevented prices from reflecting private 
production costs.   
20. The repr esentative of Japan  said that a comprehensive analysis should include both the 
positive and negative environmental effects and include reference to the fact that the extent and nature 
of the environmental impact of trade measures varied according to natura l conditions, such as climate, 
soil, production methods and other economic and social conditions in each country and area.  It was 
inappropriate to draw the simplified conclusion that all trade measures deterring trade liberalization 
should be removed whil e focusing only on environmental benefits.  WT/CTE/W/67 cited many 
references to the positive environmental effects of trade liberalization, but descriptions of negative 
ones were few.  This gave an unbalanced impression as had been noted in the NGO Sympos ium.   WT/CT E/M/17  
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More empirical analysis was necessary of the possible negative effects of trade liberalization on the 
positive environmental externalities associated with agriculture, as mentioned in footnote 38.  As 
agricultural activities were based on various nat ural conditions, an analysis of the environmental 
effects of agricultural liberalization should not be simplified.  For instance, in Asian monsoon areas, 
paddy fields played a multifunctional role in environmental protection, such as to prevent soil erosio n 
and floods.  
21. In Japan's view, empirical analysis was needed on the environmental effects of the production 
shifts led by trade liberalization.  The long term consequences on the environment of these shifts were 
difficult to determine given the variety  of conditions of agriculture in each country and region.  
Production shifts from cereal to vegetables or fruits led by market mechanisms might require 
increased use of fertilizers and pesticides.  In such cases, trade liberalization did not necessarily 
automatically lead to positive environmental effects.  Japan shared the concerns related to the negative 
effects of trade liberalization which many NGOs had expressed in the NGO Symposium.  Empirical 
experiences related to the negative impacts of agricultura l trade liberalization would have to be 
examined carefully in order for the CTE to carry out a comprehensive analysis of the environmental 
effects of trade liberalization.  
22. The representative of Australia  said agriculture was in absolute terms by far th e most heavily 
subsidized sector and there was little doubt that this had negative environmental implications through 
the concentration of production regionally and the promotion of less sustainable methods of 
production, particularly through the overuse o f fertilizers and pesticides and the underuse of crop 
rotation.  WT/CTE/W/67 noted that those economic policies which distorted trade were evolving, 
with Uruguay Round commitments and were important along with domestic policy considerations.  
The document noted that despite the increasing importance of direct payments, the greater part of 
assistance remained in the form of commodity -based market price support which directly boosted 
prices and production in the countries concerned.  This effect was often rei nforced by tariffs and 
export subsidies which compounded the flow through effects these measures had on international 
markets.  The environmental effects of these support policies were clear, with agricultural production 
levels and intensity higher than th ey would be in their absence.  This particularly related to the use of 
agricultural chemicals, fertilizers, water use, farm management systems, intensive methods of animal 
husbandry, and the widely accepted link with environmental problems, such as water a nd soil quality 
deterioration, and local air pollution.  
23. According to Australia, WT/CTE/W/67 usefully assessed the likely environmental effects of 
agricultural trade liberalization, referring to economic modelling which predicted some reallocation of 
production from subsidising to non -subsidising countries, particularly developing countries.  Many of 
the adverse environmental effects associated with current agricultural support should be reduced as 
support levels were reduced.  However, environmental ext ernalities associated with freight transport 
might rise, reallocation to export crops might increase agricultural specialization with negative 
environmental effects in some countries, or increases in production in some countries might be 
particularly damag ing due to the environmental policies or conditions holding there.  Whilst these 
points were valid, they emphasized the importance of environmental policy rather than being a reason 
for policy paralysis in the face of a pressing need for trade liberalizati on.  That trade liberalization will 
have economic benefits by increasing efficiency and economic growth and that this could feed into 
improved environmental management was another tenet of WT/CTE/W/67.  Mention was also made 
of the possible environmental n egatives that economic scale effects might produce (i.e. the GDP link 
to climate change), but the overall message was that these effects were more a ramification of overall 
economic development rather than the contribution that trade liberalization might m ake to growth.  
This scale effect would more suitably be dealt with through environmental policies, such as the 
OECD "Factor 10" initiative which prescribed improvements in input efficiency, especially for toxic 
materials.  WT/CTE/M/17  
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24. In Australia's view, future d iscussions should identify major agricultural trade policy reforms 
which could contribute to environmental improvements.  One priority was a stronger move away from 
market price support.  Attention should be given to the fact that direct payments to farmer s continued 
to provide an incentive to maintain excessive levels of production and input use.  A key issue for 
future reform efforts would be to impose greater discipline on those direct payments which had 
significantly increased in recent years and to ens ure that these disciplines were consistent with the 
objective of promoting sustainable development, including in relation to sustainable agricultural 
practices.  This would require further substantial reductions in support levels and restructuring of the 
type of support provided so as to minimize the linkages to input and production levels.  It was felt that 
another key reform area must be reductions in tariff escalation and tariff peaks, including for 
processed agricultural products.  Improvements in marke t access opportunities was a central issue on 
the agricultural trade reform agenda.  A yardstick for assessing the success of future negotiations must 
be whether they enhanced opportunities for agricultural exporting countries to increase their export 
earnings while adopting sustainable resource management policies, including greater opportunities to 
diversity economic activities.  Increased processing of agricultural products in primary producing 
countries could reduce the pressure to earn foreign exchange  through increased exploitation of the 
natural resource base.  Such a diversification in the economic structure posed its own environmental 
challenges and highlighted the importance of appropriate and well -targeted environmental policies to 
ensure greater economic growth was consistent with sustainable development.  
25. The representative of  the Philippines, on behalf of ASEAN , endorsed much of the content of 
WT/CTE/W/67, particularly on agriculture.  This document took a balanced approach to the 
environmen tal benefits of removing trade restrictions and distortions and presented the positive and 
negative environmental externalities associated with trade liberalization, whether on the soil, ground 
or effluent water, or the air.  The elimination of agricultura l trade restrictions and distortions could 
substantially contribute to the realization of environmental benefits.  WT/CTE/W/67 contained an 
empirical and theoretical analysis which provided good arguments for those engaged in WTO work 
on agriculture.  The environmental impact of distortions created by agricultural support policies was 
significant and was not only seen in the environment of those who could afford to subsidize, but also 
in the environment of those who were denied a chance to compete in world markets or even their own 
market.  This impact was exemplified in the case of cereals and dairy, where developed countries 
tended to mix a highly distortive policy cocktail of market price support, deficiency payments, 
production quotas and direct income s upport.  The recourse to export subsidies where production 
quotas were not able to prevent domestic surpluses made the absurdity in world agricultural trade 
apparent.  This example could be extrapolated to products such as meat, grains and vegetable oils.  
ASEAN supported the caveat that if production and consumption externalities were adequately 
integrated into decision -making processes, trade and environment objectives were mutually 
supportive.  Reality dictated, however, that such integration would be di fficult to carry out if 
countries, especially developing countries, did not have the initial capacity to contemplate 
environmental protection.  Whilst the environmental benefits of trade liberalization were clear, 
ASEAN felt the removal of agricultural dis tortions should begin in those countries which had the 
resources to support and distort agricultural prices.  
26. The representative of the European Communities  said the agricultural section in 
WT/CTE/W/67 contributed to the discussion and had taken account  of the EC's comments.  The 
analysis would have benefitted if account had been taken of different agricultural sectors as the 
environmental effects varied broadly from sector -to-sector.  It would have been useful to have 
considered the different schedules for the implementation of changes in production as the link 
between agricultural liberalization and environmental benefits was not automatic.  Price levels and the 
intensity of agricultural production depended not only on liberalization, but to a large ext ent on the 
development of markets, population growth and technological innovation.  As long as prices did not 
reflect environmental externalities, whether cost or benefit related, market mechanisms would not 
automatically lead to an optimal allocation of r esources.  As such, environmental policies tried to 
correct these market imperfections.  Trade liberalization often required accompanying resource  WT/CT E/M/17  
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management and environmental policies, a point which could have been emphasized in the document.  
In developi ng countries, trade liberalization and the resulting changes in price structures could under 
certain conditions lead to an intensification of production and soil degradation, particularly if 
production shifted to export crops.  Agricultural intensification  could be affected by increased need 
for food products in those countries.  The document could have given more attention to the positive 
externalities associated with agricultural practices, such as the preservation of biodiversity, regulation 
of micro cli mates, prevention of soil erosion and floods, and maintenance of local communities and 
crops.  
27. The representative of Korea  said the NGO Symposium had touched on a wide range of issues 
related to the environment, trade and sustainable development.  The S ymposium had illustrated that 
sustainable development was a concept encompassing not only environmental protection, but also 
economic growth and social development.  Linkages between the environment, trade and sustainable 
development could best be explored  through cooperation and shared responsibilities among the WTO, 
UNCTAD, UNEP, UNDP, as well as NGOs.  It had also been noted during the Symposium that trade 
liberalization per se  was not an end in itself.  Although it was widely recognized that the removal  of 
trade restrictions and distortions had potential environmental benefits, these benefits were not to be 
gained simply by liberalizing trade, but should be accompanied by proper environmental policy.  
28. Korea underscored that benefits from agricultural trade liberalization should be viewed from 
the wider perspective of sustainable development.  Korea had already explained in detail the positive 
environmental effects of agriculture and WT/CTE/W/67 shed some light on the positive 
environmental externalitie s associated with agriculture, but the analysis was tilted to the 
environmental benefits of agricultural liberalization.  Agriculture helped prevent soil erosion and 
floods, adjust micro -climates, preserve biodiversity, provide recreational spaces, and mai ntain local 
cultures and communities.  Different perspectives on the impact of agriculture trade liberalization 
should be reflected in a balanced way when the analysis is updated.  As noted in WT/CTE/W/67, 
ascertaining the outcome of agricultural liberaliz ation was difficult as there were a number of 
uncertainties and country -specific situations.  More empirical data was needed to determine the net 
environmental impact of trade liberalization.  Confronted with the unavailability of a clear -cut 
analysis, oth er objective ways of assessing environmental benefits should be explored.  The CSD was 
developing sustainable development indicators to objectively measure the achievements of sustainable 
development in all relevant fields and the OECD was developing simil ar indicators focusing on the 
environment and agriculture and composed of 8 indicators, including landscape and biodiversity.  
These approaches could also be used in the WTO.  The Secretariat should consider the development 
of these indicators capable of q uantifying the environmental effects of agriculture.  
29. The representative of New Zealand  said the discussion on agriculture pointed to several 
tangible benefits from trade liberalization in this sector.  New Zealand had reformed its agricultural 
policies  beginning in the mid -1980's as its policies were unsustainable.  These policy reforms, 
however, had had important environmental benefits.  They had led to less intensive production 
systems, less fertilizer use, less energy use in production, less speciali zation of production and less 
monoculture creating a more attractive landscape in some areas.  Marginal and easily erodible lands 
had been taken out of agriculture.  A less obvious environmental benefit was that policy advisors 
previously responsible for a dministering a panoply of agricultural assistance measures were now free 
to face new challenges, including environmental policy challenges.  He noted the prominence given in 
WT/CTE/W/67 to the environmental problems which could arise from support schemes t hat 
artificially encouraged farmers to increase production resulting in, amongst other things, soil 
degradation and the overuse of fertilizers and pesticides.  There were other effects which should be 
examined, including the negative environmental conseque nces of disposing of the surplus agricultural 
products created by such support schemes.  Whilst not wishing to underestimate the importance of the 
social concerns set out in paragraph 15, such concerns should not be used as an excuse to refrain from 
greate r trade liberalization which could bring social benefits.  He noted the importance attached WT/CTE/M/17  
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elsewhere in the document, such as in paragraph 10, to assessing reforms from an economy -wide 
perspective.  
30. In New Zealand's view, the reference made in paragrap h 40 to the issue of green buffer zones 
and the "scenic beauty of the landscape" were not convincing arguments against the need for greater 
agricultural trade liberalization.  It was possible to implement domestic environmental policies for 
these purposes whilst also pursuing liberalized trade objectives.  Environmental policies could in fact 
contribute indirectly to the development of trade, such as in tourism services.  Trade liberalization 
placed no barrier on the adoption of environmental policies;  the  two were not mutually exclusive.  
Reference had been made to the fact that trade liberalization could lead to adverse environmental 
effects and that, before dismantling trade distortions, these effects should be studied.  In this context, 
he referred to A rgentina's point that as a first step it was important to get the prices right.  Without 
correct prices, it was difficult to determine the environmental effects of trade distorting policies.  
31. The representative of the United States  said there could be l ittle doubt that agricultural trade 
liberalization could yield "win -win" situations for both trade and the environment.  One of the most 
important results which could emerge from the CTE would be to have a more informed debate on the 
relationship between t hese barriers and environmental improvements.  In the Uruguay Round, there 
had been many false arguments raised that if trade were liberalized there would be adverse 
agricultural and environmental effects.  One of the problems that these arguments made evi dent was 
that in the absence of good information it was easy to be misled.  The purpose of the CTE was to 
inform this debate.  Distortion to market signals had caused significant environmental problems with 
respect to overuse of fertilizer, distorted land values and wasteful agricultural practices.  For this 
reason, many countries which had previously protected their agricultural communities had found a 
need to reform their policies.  He agreed with Argentina that subsidies would be an important area of 
work in future agricultural discussions, but there were also other areas of distortions which equally 
deserved attention, including high tariffs and certain practices of state trading enterprises.  The US did 
not disagree with those delegations who felt there  was a need to look at the environment benefits 
which can arise from agricultural trade liberalization on a comprehensive basis.  The CTE was at an 
exploratory stage;  the first step had been taken with respect to liberalizing agricultural trade and it 
was now possible to determine the  impacts.  In this respect, the US had been interested to learn of 
New Zealand's national experience.  Specific national experiences of those countries which had 
suggested that trade liberalization could lead to adverse envir onmental effects would also be useful.  
While arguments had been put forward on the beneficial environmental effects of rice paddies, he 
asked if this meant there was an argument for putting rice paddies across entire landscapes.  
Statements at the NGO Sym posium had noted the importance of ensuring complementary policies 
were in place to deal with any possible adverse effects of liberalization.  This was not a reason to 
forestall trade liberalization;  rather, as liberalization was occurring, potential envi ronmental impacts 
should be examined and efficient policy approaches found.  
32. The representative of Switzerland  said, concerning the agricultural sector in WT/CTE/W/67, 
his delegation had some difficulty with the use of the term subsidy which considered subsidies 
systematically to be the source of the problem.  A subsidy which aimed at enhancing polluting 
production methods or the use of toxic products should be removed.  However, there were certain 
forms of internal support which could be environmentally  beneficial.  Switzerland cited its national 
experience with the use of chemical fertilizers.  A recent assessment of a network of 200 pilot farms 
carried out by the Swiss Agricultural Department showed that Swiss farmers were using less chemical 
fertilize rs.  Current consumption of nitrates was now below 1950 levels.  Since the beginning of 
agricultural reform in 1996, the quantity of nitrate fertilizers had dropped by 15 per cent, and by 2002 
was expected to drop further by 25 per cent.  These figures for med a pluriannual comparison of 
traditional farming, integrated production and biological production, based on which ecological direct 
payments had been developed.  As a result of these payments, fruit trees had become alternatives to 
traditional productio n and the share of fallow land had dropped considerably.  These figures 
highlighted that all forms of internal agricultural support were not environmentally harmful.   WT/CT E/M/17  
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Although paragraph 35 of WT/CTE/W/67 referred to the positive environmental effects of re verting 
land to recreational and other non -farm uses, several studies had shown that the use of land for 
tourism was less favourable for biological diversity than certain agricultural practices.  
33. The representative of Canada  said that the introduction a nd the agricultural section raised the 
importance of domestic prices to capture the effects of environmental externalities.  However, the 
implications of this failure for liberal trade regimes had not been explained.  The potential 
contribution of trade li beralization to the efficient allocation of resources was undermined in part by 
such market failures.  This point was consistent with the position on the environmental effects of 
agricultural trade liberalization which Canada had taken at the OECD joint wo rking group on 
agriculture and the environment.  Canada associated itself with the comments made by Argentina and 
Australia and welcomed New Zealand sharing its national experience in removing subsidies.  The 
CTE would benefit from such exchanges of experi ences.  Trade liberalization was a necessary, but not 
a sufficient condition for environmental sustainability.  Although WT/CTE/W/67 noted that "the 
abandonment of lands could reduce land values, decrease green buffer zones, and lead to a decline in 
the sc enic beauty of landscape", set aside programmes or those aimed at removing lands from 
agricultural production generally targeted environmentally fragile lands which were marginal in terms 
of agricultural productivity.  Canada, like New Zealand, felt that t he impact on land values of scenic 
beauty was an economic and cultural issue which was unlikely to be furthered usefully by the CTE.  
For example, it was not clear how green buffer zones would be decreased by land abandonment unless 
the land were put to ot her uses.  The concern noted about the environmental risks of increased freight 
traffic under trade liberalization could be addressed through SPS notifications:  365 agricultural 
related notification had been received under the SPS Agreement between 1995 a nd 1997.  On the shift 
from varied agricultural production to monoculture as food crops were replaced by export crops, both 
environmental and poverty issues were involved and more empirical data was needed to reflect these 
linkages.  
34. The representative of Norway  said that WT/CTE/W/67 set out the premise that the  failure to 
capture the effects of environmental damaging activities sent misleading signals on optimal resource 
use.  The document did not examine how widespread such externalities were in agric ulture, nor the 
extent to which agricultural policies (such as in the form of taxes or subsidies) internalized external 
effects and ensured a more optimal resource allocation than otherwise would have been the case.  
Further analysis could be added on the extent of externalities and the role of agricultural or 
environmental policies to internalize externalities.  In Norway's view, the document could also 
explore to what extent trade liberalization and environmental objectives were mutually supportive if 
externalities were widespread and not internalized.  The list of environmental effects in paragraph 13 
should include degradation of cultural landscape;  the last sentence:  "deforestation and other land 
misuses are encouraged" should be changed to:  "defores tation and other land misuses may be the 
result."  It was important to bear in mind in paragraph 14 that some support was paid as compensation 
or encouragement to farmers for addressing environmental aspects, which could be viewed as a direct 
payment for p roduction of positive environmental externalities.  In the first sentence of paragraph 15 
"in some countries" should be deleted;  it should also be noted here that the OECD Agricultural 
Ministers in March 1998 had addressed the multifunctional role of agri culture, and noted that 
well-targeted policy measures "will enable the sector to contribute to the viability of rural areas and 
address environmental issues, while enhancing efficient and sustainable resource use in agriculture".  
35. In Norway's view, the last sentence of paragraph  15:  "social and environmental concerns may 
be important ..." should be changed to "are important".  Paragraphs 33 and 343 gave an oversimplified 
presentation of the issue concerning whether agricultural expansion in regions wher e it was less 
supported would result in negative environmental effects such as loss of biodiversity, deforestation, 
and soil degradation.  Positive externalities cited in footnote 38 were important and should be 
elaborated and dealt with in the text itself .   Urbanization resulting from reduced agricultural activity 
could have harmful environmental effects and deserved more attention.  In paragraphs 39 and 40, a 
reduction of the arable land might also include other negative effects, such as centralization o f the WT/CTE/M/17  
Page 10 
 
 
population due to the few alternative employment opportunities and loss of cultural landscape, which 
had value not only as a biotope but also by providing recreational and scenic qualities.  
36. The representative of India  said that, as a predominantl y agricultural country, India was 
interested in this sector.  On paragraph 33 and footnote 28 of WT/CTE/W/67, it was important to keep 
in view that for a self -sufficient and exporting developing country any stimulation was positive;  
hence, subject to food  security considerations, liberalization should be encouraged.  Although certain 
negative impacts of liberalization were noted in paragraph 40, it was precisely for these reasons, as 
noted in paragraph 3, that accompanying domestic environmental policy wer e important for 
sustainable development.  On the differentiation between food crops and export crops in 
paragraph  42, it was necessary to keep in mind that for many developing countries export crops were 
not necessarily non -food crops, such as rice.  Furth er study was required before any of the contentions 
in paragraph 43 were accepted;  trade would likely not increase but be redirected as production moved 
to areas of comparative advantage, which was in line with the conclusion in paragraph  33.  Discussion 
of farm practices in paragraph 45 needed to keep in mind the plight of small and medium farmers.  
37. The representative of Brazil  shared the view of Argentina, Australia and New Zealand and 
felt the CTE should deepen the analysis of potential "win -win" sit uations.  Brazil was interested in 
examining market access in the agricultural sector, which represented 40 per cent of Brazil's GNP.  
Trade barriers in this sector affected Brazilian agricultural exports and prevented access to financial 
resources that ma y be applied to sustainable production methods.  Brazil encouraged delegations to 
contribute their national experience to provide a more informed debate.  Brazil would like to 
contribute to the process of identifying "win -win" situations by presenting the case of Brazilian soya 
plantations.  Given the biodiversity in the Brazil, agriculture had different environmental impacts 
which called for different models of sustainable production.  Among the challenges to develop these 
models, there was a need to achie ve optimal agricultural incomes.  In Brazil, the question of 
agricultural income was directly linked to the introduction of environmental management systems in 
agriculture.  The maintenance or elevation of optimal levels of agricultural income was linked t o 
better market access for commodities.  
38. The case of soya plantations was a significant example of the linkage between income and the 
use of environmentally sound farming practices.  Brazil is the second largest world soya producer;  
with one third of n ational production going to the internal market, and the other two thirds being 
exported, which represented US$3.8  billion in 1995.  The revenue yielded by soya depended on 
access to foreign markets.  These revenues had allowed for the introduction of Dire ct Planting 
techniques in soya cultivation.  Since 1990, the use of Direct Planting as a sustainable production 
practice had permitted an increase of approximately one million hectares of soya per year.  This 
system had also permitted several environmental  benefits, such as the reduction of soil erosion by 
more than 90 per cent, and the reduction of pollution from agro -chemicals.  Carbon emissions also 
had been reduced by 40 to 70 per cent as a result of decreased use of diesel in farming.  Herbicide and 
pesticide use had also been considerably reduced.  The fact that soya yielded the best levels of 
agricultural income among Brazil's main agricultural products was an example of how market access 
stimulated sustainable production.  Concrete examples from othe r delegations may be useful to show 
the link between trade and the introduction of environmental management systems.   
Energy  
39. The representative of Brazil  said WT/CTE/W/67 was a basis for discussions of "win -win" 
situations.  To deepen work on market a ccess, Members could present their own contributions to 
include other areas or specific products that might benefit from trade liberalization and would also be 
of environmental benefit.  Brazil felt the CTE should give special consideration to the energy s ector.  
As WT/CTE/W/67 noted, production in the energy sector was not an end in itself, but an important 
input to almost all economic activities.  The document identified petroleum, coal, natural gas and 
electric power as the primary energy sources.  The d ocument identified that this sector was still  WT/CT E/M/17  
 Page 11 
 
 
considerably subsidized and some energy taxes still restricted trade;  the removal of subsidies and the 
restructuring of taxes to bring energy prices in line with marginal social costs could result in 
significa nt environmental benefits.  Following these conclusions and considering the commitments 
established in the Kyoto Protocol, Brazil addressed renewable energy sources, particularly the case of 
alcohol fuel.  Article 4(d) of the Climate Change Convention esta blished that all Parties should 
"promote sustainable management, and promote and cooperate in the conservation and enhancement, 
as appropriate, of sinks and reservoirs of all greenhouse gases not controlled by the Montreal 
Protocol, including biomass, fore sts and oceans as well as other terrestrial, coastal and marine 
ecosystems".  Articles 10 and 11 of the Kyoto Protocol went further in the implementation of those 
commitments to "formulate, where relevant and to the extent possible, cost -effective national , and 
where appropriate regional programmes to improve the quality of local emission factors ...", and 
formulated and implemented programmes that would, inter alia , concern energy, transport and 
industry sectors as well as agriculture, forestry and waste m anagement.  In view of these 
commitments, Brazil proposed that the CTE explore "win -win" situations related to energy.  
Developing countries might benefit from market access, while developed countries might have better 
access to cleaner renewable energy so urces that reduced anthropic emissions responsible for 
increasing the greenhouse effect.  
40. Brazil presented its national experience with the use of ethanol fuel.  In response to the oil 
crises of the mid -1970s, the Brazilian government, in cooperation wi th private industry, in 1975 
created the National Alcohol Programme ("PROALCOOL") to produce alcohol from sugar cane and 
to build ethanol compatible engines.  To better balance Brazil's petroleum consumption with its crude 
oil production, research was cond ucted from the late 1960s to the early 1970s to identify an 
economically viable alternative to oil as a fuel source.  Ethanol, extracted from sugar cane, was 
chosen as one of these alternatives.  By 1985, when the programme had been in operation for ten 
years, some US$6.5  billion had been invested in the production of 50 billion litres of ethanol, some 
500,000 jobs had been created, 2.5 million vehicles were running on pure ethanol, and all the gasoline 
at filling stations had a blend of 20 per cent ethanol .  Brazil had technology and equipment capable of 
maintaining a 16 billion litre annual output and of potentially exporting the related technology, 
equipment and services.  By dramatically reducing the level of carbon monoxide released by motor 
vehicles, P ROALCOOL was contributing to Brazil's efforts towards environmental protection.  Since 
ethanol from sugar cane was a renewable resource, 15 per cent of Brazil's total emissions, or 
9.45 million tons of carbon, from fossil fuel was avoided.  Around 25 per c ent of passenger cars 
manufactured in Brazil currently used ethanol.  Today, a few countries around the world, like Canada, 
the US and South Africa were also testing both blended and neat (near 100 per cent) alcohol fuels (in 
the U.S., for instance, ethano l blends made up about 12 per cent of the total gasoline market.)  In 
some other countries, projects were underway to test the viability of replacing diesel fuel with ethanol.  
41. Brazil found the use of ethanol had several environmental benefits, particul arly related to the 
reduction of greenhouse gases in support of the Kyoto commitments, such as:  (a) reductions in 
carbon monoxide levels (25 to 30 per cent reductions in emissions with a 10 per cent ethanol blend 
with gasoline;  and up to 70 per cent redu ctions with ethanol fuel);  (b) reductions of carbon dioxide 
emissions.  Although carbon dioxide was released when ethanol was burnt, it was recycled into 
organic tissue during plant growth;  in fact, ethanol use in gasoline might even result in a net 
reduction in atmospheric carbon dioxide levels;  (c) use of a renewable resource.  Ethanol was derived 
from renewable biological feedstocks such as agricultural crops and forestry by -products.  
Commercial alcohols might use sugar cane, corn or other plants as a resource for producing ethanol;  
and (d) reductions in ozone depleting emissions.  The use of ethanol or ethanol -blended gasoline 
resulted in a net reduction in ozone -depleting emissions, such as carbon monoxide and hydrocarbons.  
Other benefits were als o worth mentioning, like the creation of jobs and the retention of rural 
populations.  Gas emissions from sugar cane production were also smaller than those of other energy 
sources.  WT/CTE/M/17  
Page 12 
 
 
42. Similar to the traditional energy sources identified in WT/CTE/W/67 (p etroleum, coal, natural 
gas and electric power), ethanol faced high tariffs.  Major developed countries applied tariffs which 
ranged from US$0.17  to US$0.33  per litre for ethyl alcohol.  Some countries also applied additional 
duties to their tariffs, addin g, for example US$0.1427 to a tariff of 2.8 per  cent.  Concerning other 
trade distortions, subsidized exports in some countries might reach US$39.3  million on 
450,000  hectolitres of ethyl alcohol.  Reducing subsidies might result in lower costs for alcohol  
production.  It was a fact that the development of the alcohol industry had benefitted from subsidies in 
its initial phases in response to the increase of the price of oil during the 1970s and the 1980s.  Those 
subsidies, however, had been gradually phase d out.  Brazil acknowledged that certain subsidies in the 
energy sector could be used to provide incentives for the development and use of renewable energy or 
more environmentally sound technology as was noted in paragraph 60 of WT/CTE/W/67.  Brazil 
envisa ged that better market access for ethanol would depend on future technological changes in car 
engines towards the use of 100  per cent ethanol fuel.  Some countries already blended their gasoline 
with a small percentage of ethanol, which represented a signi ficant opportunity for ethanol producers.  
43. Brazil intended to present further information on this issue.  The potential existed for tariff 
reductions and the elimination of trade distortions related to this specific product to provide improved 
market ac cess conditions to this cleaner energy source, improved efficiency in the allocation of 
resources and environmental benefits.  Alcohol provided a concrete example of a "win -win" situation, 
which would endorse the main objective of the CTE to ensure that tr ade and environment were 
mutually supportive.  
44. The representative of the European Communities  said that the emphasis on energy in 
WT/CTE/W/67 was on the effects of subsidies and taxes related to fossil fuels and the contribution 
their reduction could ma ke to environmental quality.  This was important, but the assessment needed 
qualification.  Although subsidies removal for some energy sources, such as coal, could bring 
automatic environmental benefits, other accompanying measures were often necessary to promote the 
internalization of environmental externalities in energy prices.  Internalizing environmental 
externalities arising from energy production and use was a fundamental requirement, and the role that 
taxation could play in achieving this objective had not been sufficiently emphasized in the document.  
It would also have been worthwhile to give greater consideration to the positive environmental effects 
that could arise from reducing trade restrictions which had an impact on renewable and 
environment ally sound technologies related to energy.  The increasing importance of global 
environmental problems, in particular climate change, resulting from the use of fossil fuels had not 
been adequately addressed in the document.  It would have been useful to re fer to the Kyoto Protocol 
to the Climate Change Convention under which Annex I countries had accepted quantified emissions 
limitation and reduction commitments for six  greenhouse gases.  Annex I Parties had agreed to 
progressively reduce or phase  out marke t imperfections, fiscal incentives, tax and duty exemptions 
and subsidies in all greenhouse gas emitting sectors that ran counter the objective of the Climate 
Change Convention and to apply market instruments (Article  2.1(a)(v) of the Kyoto Protocol).  
Annex I Parties had also agreed to cooperate with each other to enhance the individual and combined 
effectiveness of their policies and measures in this and other areas.  
45. The representative of India  supported the EC's suggestion that the CTE discuss the Ky oto 
Protocol.  He agreed with the statement in paragraph 57 of WT/CTE/W/67 that energy had an impact 
on all aspects of economic activity.  India was concerned about the proposed need to assess significant 
environmental benefits of removing energy subsidies  in developing countries, as mentioned in 
paragraph  67.  India would assess the impact on production costs, access to new technologies, 
especially information technology.  Apart from addressing the issue of removing energy subsidies, 
noted in paragraph 70,  the transfer of environmentally sound technology should also be examined as 
another way to promote energy use.  India would comment on the coal sector referred to in 
paragraph  73.  WT/CT E/M/17  
 Page 13 
 
 
46. The representative of Canada  said that in the wake of the adoption of t he Kyoto Protocol, the 
scale and increasing nature of coal subsidies which persisted in some countries was disturbing.  One 
of the important contributions of the Kyoto Protocol would be the extent to which it would send out a 
global signal in favour of low er carbon energy sources.  Subsidies could mask such important market 
signals.  WT/CTE/W/67 could also have treated the importance of developing clean coal technologies.  
The Clean Development Mechanism agreed in Kyoto was a potentially useful mechanism fo r private 
sector transfer of such technologies to help meet the agreed emission reduction commitments.  Canada 
was aware of Brazil's leadership role in developing alternative, lower carbon fuels and thanked Brazil 
for sharing their experiences and offering  to contribute a paper setting out this experience in detail.  
47. The representative of Morocco  referred to the fact that the Kyoto meeting of the Convention 
on Climate Change had not been included in the energy sector of WT/CTE/W/67, as had been noted 
by the EC.  The Kyoto Protocol gave the international community a way of reducing greenhouse gas 
emissions.  International trade should follow the provisions of this agreement.  He noted the need for 
technical assistance for developing countries in the contex t of activities implemented jointly or 
bilaterally.  
Fisheries  
48. The representative of Japan  said that overexploitation was one of the major problems in the 
fisheries sector.  Conservation of fish stocks could not be achieved only by reducing subsidies gi ven 
that the main cause of overexploitation was the lack of sustainable fisheries management;  reducing 
subsidies would not always lead to sustainable fisheries.  To improve the situation, all factors should 
be comprehensively considered and cooperation be tween the competent international organizations 
was essential.  FAO was dealing with overcapacity issues and in April, FAO would hold an expert 
meeting on this matter.  In examining trade and environment in the fisheries sector, it would be useful 
for the CTE to receive input from the FAO.  Some subsidies positively affected marine ecosystems, 
for instance by restoring fishing grounds, supporting relevant research and ecologically sound 
technologies, and training fishermen to acquire ecological methods of f ishing.  
49. The representative of New Zealand  proposed that, given the interest in the wider international 
community in this area, as illustrated in the NGO Symposium, WT/CTE/W/80 should be derestricted.  
He said that world fisheries were in crisis and glo bal fish stocks overexploited.  A large part of this 
problem was due to overcapacity, whereby too many fishermen followed too few fish.  New Zealand 
was concerned about the trade effects of fishing subsidization which contributed to overcapacity.  
Fishing industry subsidies encouraged the use of fisheries resources above normal economic rates of 
exploitation.  Inflated returns encouraged excess capacity and overfishing particularly in poorly 
managed fisheries.  This had implications for the supply of fish t o consumers and processors.  These 
supply distortions  placed downward pressures on world seafood prices.  Depressed prices affected the 
ability of developing countries in particular to achieve economic returns from their fishery resources.  
In addition to  competition from subsidized industries, developing countries faced tariff escalation.  
These trade effects were serious and should be borne in mind when examining the environmental 
benefits from removing fishing subsidies.  New Zealand endorsed the point which had been raised, 
which should be examined for other sectors, was that merely removing trade distorting measures 
would not automatically result in environmental benefits.  However, in the past decade, the 
international community had focused extensivel y on developing rules and policies designed to ensure 
better conservation and management of fisheries resources.  There had been a number of agreements 
elaborated, such as the UN Agreement on Straddling and Highly Migratory Fish Stocks, as well as 
Codes Co nduct.  But in no case did these agreements address the overcapacity problem, which was 
being fuelled by subsidization.  
50. New Zealand would welcome contributions from the OECD and FAO on their ongoing work 
in this area.  In APEC, Japan and New Zealand ha d co-sponsored a study which would include a list 
of the generic types of fishery subsidies, the policy objectives behind them and seek to analyse their WT/CTE/M/17  
Page 14 
 
 
relationship with the WTO Agreement on Subsidies and Countervailing Measures.  It was also being 
propos ed that APEC Members would voluntarily remove all prohibitive subsidies and ensure that any 
non-actionable subsidies were applied in conformity with WTO rules.  This proposal would be put 
forward to APEC Ministers in June 1998.  It illustrated the recognit ion of the need for action in this 
area.  New Zealand hoped Members would take voluntary steps to remove fishery subsidies because if 
these steps were not taken then there would be increasing pressure to resort to the provisions of the 
Subsidies Agreement and to dispute settlement action.  WT/CTE/W/80 provided useful information 
on the diverse range of subsidies notified by WTO Members in this area.  A few notifications 
identified environmental objectives as part of the rational of a subsidy;  New Zealand, for its part, 
would be examining the information.  Although the point had been made that some subsidies could be 
environmentally beneficial, it was important to consider the secondary effects of some of these 
subsidies.  If the subsidy meant that fishermen  would remain active in an unsustainable fishery, this 
would need to be carefully examined.  New Zealand would also welcome comments on its paper, 
WT/CTE/W/52.  
51. The representative of Norway  said that the most important factor in achieving sustainable 
fisheries was the application of resource management policies.  Resource management was, however, 
outside the WTO's scope.  As pointed out in WT/CTE/W/67, trade in fish products was affected by 
traditional measures, such as tariff barriers and non -tariff bar riers;  a variety of forms of subsidies 
existed in the fisheries sector, many of which had negative effects on fisheries, while others might act 
to reduce fishing efforts.  The question of whether and how trade liberalization affected fishery 
resources rem ained unanswered in WT/CTE/W/67.  All aspects of fisheries subsidies should be 
studied before conclusions were drawn on their effects and further work should make a clear 
distinction between overexploited and efficiently managed stocks.  This distinction h ad been made in 
OECD studies which tended to conclude that trade liberalization would likely have only a small 
impact in the fisheries sector.  Resource management was a more significant factor.  
52. The representative of the United States  said that though WT/CTE/W/67 and WT/CTE/W/80 
contributed to the discussion, further work should build on New Zealand's analysis.  It was clear that 
although the elimination of subsidies might not solve all environmental problems, the current level of 
expenditure of effort in the fisheries sector would not be possible without an enormous amount of 
subsidization.  Given that the world's fisheries were in crisis, any contribution to ameliorate this 
problem was needed.  The US agreed with Japan, Norway and New Zealand that it w ould be valuable 
to have input from other organizations, such as the FAO, OECD and the CSD, such as through 
Secretariat up -dates of this work or direct contributions from those organizations.  At the NGO 
Symposium, it was noted that the WTO notification pr ocess related to fisheries subsidies was not 
working well.  In this context, he supported the derestriction of WT/CTE/W/80.  
53. The representative of Australia  said WT/CTE/W/67 and WT/CTE/W/80 illustrated that the 
trade and environment perspective applied to the fisheries sector.  This sector fitted well into the 
category of having significant economic policy distortions which given their nature and size had an 
impact on international markets.  The fishing industry also had a direct and significant impact o n the 
physical environment, which was currently of great concern with many fisheries under great pressure 
and stocks dwindling.  Known recorded catch was above sustainable rates and unreported fishing 
contributed further to the problem.  As WT/CTE/W/67 not ed, the FAO estimated that 60 per cent of 
the world's conventional fish species were fully exploited, overexploited or in the process of 
rebuilding as a result of depletion.  The FAO currently estimated that a 30 per cent reduction of world 
fishing capacit y was needed to allow overfished stocks to recover.  This situation was being driven by 
the distortion of the cost structure of the fishing industry by heavy subsidization.  Some subsidies 
were aimed at improving the ecological sustainability of fishing ac tivities.  WT/CTE/W/80 noted that 
such subsidies were overshadowed by those that increased or maintained fishing overcapacity.  Even 
if so -called positive subsidies aimed at environmental objectives might be justified in some 
circumstances, they should be carefully designed to ensure their objectives were met.  The danger was 
that payments would find their way into the revenue streams of active fishers and promote fishing.   WT/CT E/M/17  
 Page 15 
 
 
54. In Australia's view, WT/CTE/W/80 provided an illustration of the variety of subsi dies being 
paid by a range of countries to fisherpeople.  From the descriptions of many of these subsidies, it 
seemed likely that they would impact on the cost -structures and levels of activity in this industry in a 
variety of countries, and thereby on the  marine environment.  This being the case, it was important for 
the WTO to continue collecting information on the nature and extent of subsidization in this industry.  
The growing importance of fisheries trade to developing countries had been noted, with 1 0 of the 41 
vulnerable single -commodity dependent economies reliant on seafood for at least 40 per cent of their 
exports.  For these countries, the reconciliation of improvements in market conditions and 
environmental management would be especially importa nt.  Special difficulties existed for smaller, 
less wealthy countries with fewer resources to devote to environmental management.  Capacity 
building might be needed if the double dividend was to be realized.  Increased returns resulting from 
reform of inte rnational markets would also allow these countries to improve their capacity to manage 
fisheries.  
55. The representative of the European Communities  said WT/CTE/W/67 examined several 
elements which had an impact on the industry and on fish stocks.  The key  issue in sustainable 
resource exploitation was fisheries management, not trade.  In the fisheries sector it was particularly 
important that trade liberalization be accompanied by sustainable resource management both at the 
national and international level .  Fisheries was the example used to demonstrate how markets failed to 
integrate environmental costs and benefits.  Regional fishery organizations played a key role in 
sustainable fisheries management.  Subsidies were not inherently good or bad for fish st ocks;  
subsidies which corrected environmental externalities were not trade distorting, whereas those which 
subsidized fishing directly would distort resource allocation.  The EC questioned, however, the 
unqualified assertion in WT/CTE/W/67 that "it has be en widely recognized that fishing subsidies are a 
major contributor to ... the mismanagement of fisheries resources".  Although in some organizations it 
had been suggested that certain subsidies were not resource management neutral, this was did not 
condem n all forms of subsidies.  Reference could have been made to non -tariff measures related to 
transit and access to ports, which could have a significant impact on resource conservation, especially 
when used to prevent illicit fishing.  Reference could also have been made to trade measures used 
against countries unwilling to cooperate in the responsible management of fishery resources on the 
high seas.  
56. The representative of Argentina  thanked New Zealand and the US for their papers on the 
fisheries sector,  which was an example of a "win -win" situation.  He shared New Zealand's comment 
on the interest in the environmental community which had been expressed at the NGO Symposium on 
exploring "win -win" situations.  The CTE should not miss the opportunity to adv ance environmental 
benefits with respect to further trade liberalization.  It is recognized that subsidies were not the only 
factor acting against sustainable fisheries management.  One of the main factors was open access to 
fisheries resources, particular ly outside the 200 mile zone and for highly migratory species, or 
straddling stocks.  Moreover, many developing countries had difficulties in negotiating and enforcing 
equitable access agreements to fisheries located in their Exclusive Economic Zones (EEZs ) due to 
their low monitoring capacity and their economic situation.  Given that developing countries were 
constrained to obtain short term benefits, sustainable resource exploitation was a luxury which many 
could not afford.  In this scenario production s ubsidies provided to high sea fleets were particularly 
harmful, as witnessed in agriculture.  Although the WTO's capacity to act to improve fisheries 
management was limited to its area of competence, subsidies reduction would allow for more efficient 
resou rce use which would reduce pressures on fisheries resources.  The implementation of 
environmental and sustainable resource management policies had to go hand in hand with the 
elimination of government policies, such as subsidies, which contributed to resou rce depletion.  He 
supported New Zealand's proposal to derestrict WT/CTE/W/80 and also considered that it would be 
very useful to invite other intergovernmental  organizations such as OECD and FAO to contribute to 
the CTE discussion.  WT/CTE/M/17  
Page 16 
 
 
57. The representative  of Korea  thanked New Zealand and the US for their contributions to the 
fisheries sector.  Korea shared the view of Japan and Norway that overcapacity and overfishing had 
caused serious problems for fisheries sustainability.  However, there were other aspe cts to be 
considered such as resource management policies and other trade barriers.  The compilation of 
subsidies notified by WTO Members in WT/CTE/W/80 included environment -friendly and unfriendly 
subsidies.  There were subsidies for the "Fisheries Altern ative Programme" provided to help 
long-term diversification of affected fishery -dependant communities or to provide employment for 
workers displaced by a downturn in the fishery industry; and a subsidy that took the form of tax 
deferrals that existed to fa cilitate the structural improvement of SMEs.  Certain countries provided 
subsidies to raise fishermen's income without increasing the catch, by improving the value -added of 
fisheries products and the quality, processing and preservation of fish stocks.  Th ere were also 
subsidies for the temporary or final end to fishing and for the scrapping of fishing vessels;  subsidies 
for vocational training were widely used.  Korea had also introduced subsidies for restructuring the 
fisheries industry with a view to re locating fishermen to other industries.  Analysis was needed to 
determine the net impact of subsidies on the marine environment.  The distinction between diverse 
subsidies should be made and aggregate net impacts analysed, including both positive and negat ive 
effects, of fishery -related subsidies.  Korea supported cooperation between the WTO and other 
relevant international organizations, such as the FAO and the CSD, to strengthen the knowledge of the 
CTE of these issues.  
58. The representative of Canada  said WT/CTE/W/67 accurately described the situation in global 
fisheries, particularly the threat to the sustainability of world fishery resources as a result of 
harvesting overcapacity and overfishing.  Subsidies were identified as a major factor resulting i n 
overcapacity while also noting that certain subsidies could have positive environmental impacts by 
reducing fleet capacity, restraining fishermen, enhancing fish stocks, promoting vessels and fishing 
license buy -backs.  These were the types of subsidies which Canada supported in part to take pressure 
off fisheries resources.  Paragraph 20 noted the contribution of eliminating trade restrictions in this 
sector was difficult to isolate relative to numerous other factors affecting this sector.  Canada 
associ ated itself with the concerns raised with respect to fishery subsidies.  However, the 
environmental benefits of eliminating tariff and non -tariff measures should also be noted.  Barriers 
which supported artificially high price levels would increase import competition in the market and 
place downward pressure on prices.  This would bring about the rationalization in the domestic 
industry forcing some inefficient players out of the industry and reducing the size of domestic fleets.  
This would have as positiv e an effect on harvesting capacity and resource sustainability as subsidies 
removal.  These benefits should receive greater consideration.  The figures quoted in WT/CTE/W/80 
were 1992 FAO statistics on subsidies;  further work was welcomed by FAO and other s to update this 
data.  Canada supported the derestriction of WT/CTE/W/80 given the interest shown by participants at 
the NGO Symposium.  
59. The representative of Thailand, on behalf of ASEAN , would comment on WT/CTE/W/80 at a 
later stage.  
60. The represen tative of Morocco  said proper management of the marine environment would 
contribute to the protection and sustainable development of fisheries resources.  According to 
scientific research, the world fish stocks were decreasing due to overexploitation and f ishing methods 
used, such as drift -nets, particularly in the EEZs and the high seas.  Measures to safeguard and 
develop fishery resources should be envisaged through the reduction and elimination of fishery 
subsidies to reduce the cost of capital investmen t in the industry.  Even if eliminating these distortions 
would not guarantee a viable use of fisheries, it was one means to enhance sustainability.  Tariff 
escalation was a problem for developing countries and was detrimental to the diversification of fis h 
products and market access.  Programmes to promote sustainable fishing methods and to encourage 
biological rest periods should be set up.  Such issues were being addressed in the Law of the Sea, the 
Biodiversity Convention, CITES, the Agreement on the Pr omotion and Management of High Seas  WT/CT E/M/17  
 Page 17 
 
 
Fishing, the Agreement on the Preservation of Migratory and Straddling Stocks, and the FAO Code of 
Conduct.  
61. The observer of the OECD  said a study was being launched on the question of government 
financial transfers a nd how they affected the transition to responsible fisheries.  For the time being, 
the relationship between these transfers and international trade was not a subject of analysis.  There 
were a large number of countries in the OECD Committee for Fisheries w hich had expressed their 
interest in exploring trade matters, but only after impacts on resource sustainability had been 
analysed.  The framework for collecting information on financial transfers as part of the current 
OECD study would have sufficient flex ibility to be used in other analyses.  
62. The observer of FAO  said FAO was carrying out a study on subsidies in the fisheries sector 
which concentrates on developing countries, as a compliment to the OECD study.  Some indications 
of the global levels of fi sheries subsidies were lower than the US$54  billion published in 1992.  There 
were some estimates around US$14  billion.  Between developed and developing countries, subsidies 
levels in developing countries were much lower and more concentrated in certain c ountries.  She 
noted that in April, Japan was sponsoring a technical working group on fishing overcapacity and in 
June the FAO Committee on Fisheries was organizing a meeting on fish trade where issues including 
trade and environment would be addressed.  
63. Concerning the derestriction of WT/CTE/W/80, the Secretariat  said that the fact that NGOs 
had had access to WT/CTE/W/67 had given them a clear indication of the relevance of CTE work and 
the extent to which many of the issues which concerned them were be ing taken up during the course 
of the  deliberations of the CTE.  Many NGOs had begun to realize that the WTO had a role to play 
in, for example, furthering trade liberalization in specific sectors.  
64. The Chairman  invited those delegations who had indica ted they would need to consult with 
their capital on the derestriction of WT/CTE/W/80 to inform him of the outcome of their 
consultations.  
Forestry  
65. The representative of Canada  presented his delegation's paper highlighting Canada's national 
experience with respect to certification, standards and labelling in the forestry sector, WT/CTE/W/81 -
G/TBT/W/61.  This paper had benefitted from consultations in Canada, not only with respect to the 
federal government departments concerned, but also all of the group s that had developed the 
approaches discussed in the paper.  It was issued under the responsibility of the Canadian Government 
but Canada would be remiss not to acknowledge the extremely valuable contributions made by those 
outside the government.  The pap er was found useful in Canada to refine its understanding and 
thinking regarding the various approaches, which reinforced Canada's conviction that the CTE could 
play an important role in domestic policy coordination.  To facilitate further discussion of th is paper 
in Canada and elsewhere, it had been issued as unrestricted;  it had been issued as a joint CTE -TBT 
paper given that it focused on standards and labelling issues which fell under the TBT Agreement.  
Canada requested that this statement be provided  to the TBT Committee for inclusion in its minutes.  
Canada welcomed the EC's interest in mainstreaming environment in the WTO and looked forward to 
more active discussion of standards and labelling issues in the TBT Committee.  
66. Forests and forests prod ucts were a leading edge sector where the trade and sustainable 
development issues were issues with which government, industry, and wider civil society had to 
grapple.  These issues were not theoretical, but of real environmental, economic and social impac t.  
The debate had underlined that sustainable resource management practices reinforced both 
environmental and economic objectives.  Canada's forests were 10 per cent of the world's forests, an 
area almost twice as large as the EU, covering approximately o ne-half of Canada.  Forests with 
commercial potential were approximately 50 per cent of Canada's total forests.  The forest products WT/CTE/M/17  
Page 18 
 
 
sector was the largest net contributor to Canada's trade balance, with exports of approximately 
US$30  billion in 1996.  Dir ect employment was approximately 300,000, which included significant 
employment in rural areas.  In contrast to many countries, where the forests were largely owned by 
private citizens or companies, 94 per cent of Canada's forests were owned by governments , mainly at 
the provincial level.  
67. Canada's forest policies had evolved, reflecting the evolution of views of the country's 
seemingly endless forests in the past.  From initially viewing forests as an economic resource, forests 
were now viewed through t he full range of environmental, social, cultural, and economic values.  
Sustainable forest management (SFM) was thus broader than environmental considerations and was 
the basis for Canada's regulatory framework.  The Canadian Council of Forest Ministers, r egrouping 
the federal and provincial Ministers responsible for forests, developed the national strategy for 
sustainable forest management.  Regulations were set at mostly the provincial level.  The strategy was 
developed through a broad national consultati ve process, involving the participation of the wide range 
of members of society that were interested in SFM issues.  The second national strategy would be 
released shortly to further refine the original strategy's objective to ensure that Canada's approach  to 
SFM included a range of both timber and non -timber values, while protecting the integrity, health and 
diversity of Canada's forest ecosystems.  National Criteria and Indicators were developed through a 
similar open and inclusive process.  Canada's crit eria were consistent with the Montreal process.  The 
indicators reflected the unique features of Canada's forests, and incorporated a wide array of forest 
values.  There was no single internationally agreed definition of SFM.  An international definition 
would be beneficial to improved forest management as well as reducing the possibility of trade 
barriers.  Canada supported an international convention on forests that could include such a definition 
of SFM.  
68. Within this general policy context of SFM, a n umber of voluntary instruments had been 
developed to respond to customer interests on resource management and product production aspects 
of lumber and paper production.  Certification standards or schemes pertained to the forest 
management phase while labe lling programmes generally focused more on the production phase.  As 
such, these instruments only captured part of the life -cycle of forest products and should be viewed in 
that context.  Some general issues were important to keep in mind in considering th ese approaches, 
including:  (a) the development process;  (b) auditing processes;  (c) reference to national regulation;  
(d) methodologies;  and (e) equivalency.  ISO 14001 was the international environmental 
management system (EMS) standard that was fami liar to all and which could be applied to both 
resource management and production phases.  Certification could either be "pure" certification in that 
it only dealt with how a particular forest was managed without any chain of custody tracking to the 
final consumer.  The Canadian Standards Association, CSA -Z808/9 -96:  A Sustainable Forest 
Management Certification System, followed this approach.  The alternate approach was that of the 
Forest Stewardship Council (FSC) which was a product certification system t hat used chain of 
custody to label products that were managed according to the FSC Principles and Criteria.  The two 
main types of eco -labels were Type  III "report card" labels, such as the Environmental Profile Data 
Sheet and Type  I single mark eco -labels , familiar to the CTE from earlier discussions, which included 
such programmes as Environmental Choice.  
69. The ISO 14001 EMS Standard took a system approach aimed at integrating environmental 
policy considerations into general firm management.  ISO 14001 specified the process that an 
organization had to follow in order that its management system applied to environmental concerns.  
The ISO 14001 series was developed through the same systematic approach to building consensus as 
other international standards.   In addition to the 70 national standardizing bodies, a large number of 
liaison organizations, including NGOs, had also participated in the development process, reflecting 
the perceived broader public policy potential impact of ISO 14000.  A multi -stakeho lder Canadian 
Advisory Committee had formulated the Canadian position to ISO.  ISO 14001 did not establish 
performance measures, nor prescriptive approaches on how to achieve performance targets.  These 
were provided by the national regulatory framework un der which an organization operated.  Industry  WT/CT E/M/17  
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generally preferred this approach as it provided considerable flexibility in terms of how to meet 
national regulations through the application of continual improvement.  A forest company might 
implement ISO 140 01 in its pulp mill and saw mills.  Its corporate environmental policy might also 
included a commitment on its forest management operations.  The company could choose to 
implement ISO 14001 on its forest management operations, or it could choose to impleme nt the more 
stringent CSA -Z808/9 standard.  Internationally, ISO Working Group 2 had developed a draft 
bridging document to facilitate implementation and use of ISO 14001 by forest organizations.  ISO 
14001 was generally favoured by large companies as a ma nagement tool to improve environmental 
performance or minimize environmental liabilities.  Organizations were not allowed to label their 
products "ISO 14001".  
70. The CSA Sustainable Forest Certification System Standard was developed by the Canadian 
Standa rds Association, one of the four national standards development organizations mandated by the 
Standards Council of Canada.  The standard was developed through a multi -stakeholder process that 
included auditors and academics, producers, general interest and  government.  Such inclusive 
approaches were central to the credibility of voluntary standards.  The standard was based on the 
management systems approach of ISO 14001, including continual improvement.  However, it was 
also a performance standard in certai n key respects.  Performance aspects of the standard included 
reference to the Canadian Criteria and Indicators and the specific requirements for public consultation 
and input.  It was thus ISO 14001 "plus".  The auditing process similarly reviewed both sy stems and 
field performance measures.  The major cost was not certification by an external auditor, but rather 
the indirect and direct costs to the company of developing and operationalizing the management 
system.  It had been estimated that approximately 200,000 square kilometres was in the process of 
certification.  This was an area approximately 80 per cent of the United Kingdom.  The first 
certification was expected by 1999.  Although the CSA standard applied to a specific forest, no CSA 
labelling of pr oducts coming from that forest was permitted.  Thus, issues related to chain of custody, 
particularly problematic for paper production, did not arise.  The CSA standard was generally 
supported by industry given that the standard was developed by a national  standards development 
organization;  its general preference was for the greater flexibility of management system approaches 
in reaching performance targets.  
71. The Forest Stewardship Council had been developed by a variety of NGOs, buyers of wood 
product s and certifiers.  Producers were not significantly represented in the development process.  It 
took more of a performance standards approach - i.e. do's and don'ts - to forestry management rather 
than a management systems approach.  In contrast to normal certification processes, certifiers 
interpreted the general Principles and Criteria rather than certifying that specific standards had been 
adhered to.  The development of regional standards was, as acknowledged by the FSC itself, designed 
to remove what m any considered to create possible conflicts of interest for certifiers.  In Canada, no 
forests were yet being certified to FSC.  Worldwide, the FSC stated that 80,000 square kilometres had 
been certified, an area the size of Austria.  The chain of custody approach of the FSC was more suited 
to lumber production than paper, given that paper mills typically source their fibre from a variety of 
sources.  Thus tracking of these sources, and segregation of certified and non -certified fibre, was more 
problematic for large -scale producers.  The FSC was more demand driven than other approaches, 
given the formation of buyers' groups that required FSC or equivalent certification.  As noted in the 
NGO Symposium by several NGOs, the FSC was viewed as the approach to SFM  certification rather 
than other evidence of well -managed forests.  
72. The Environmental Profile Data Sheet (EPDS) was developed by the Canadian Pulp and 
Paper Association as a means of responding to customer concerns regarding the life -cycle 
environmental  attributes of pulp and paper.  Developed through a multi -stakeholder process, the EFPS 
was a voluntary, standardized and third party reporting form that was similar in approach to 
nutritional labelling.  Given the nature of the detailed information, the E PDS was designed for large, 
sophisticated industrial customers that had the in -house capability to compare the environmental 
performance of suppliers.  It was not designed for the retail level.  The EPDS provided customers with WT/CTE/M/17  
Page 20 
 
 
detailed information regardi ng forest management, fibre use, efficiency and source, energy and water 
use, liquid effluent, solid waste and air emissions.  This data allowed customers to compare suppliers 
with respect to the environmental attributes they judged most important.  Custom ers, not third parties, 
determined which criteria were important, and what thresholds were important.  Moreover, the main 
use of the EPDS would likely be by firms who considered themselves environmental leaders and who 
sought an objective and credible mean s to communicated this leadership.  This flexible approach to 
selectivity made "report card" environmental labels such as EPDS more attractive to industry as they 
were not prescriptive, but effectively left decisions to customers.  The EPDS, by providing t hird party 
verified detailed information, provided firms with the data and measurements that could be used as 
the basis for continual improvement.  The preparation of the EPDS required close monitoring of 
operation in order to generate the data;  this proc ess often identified particular parts of their processes 
where improvement was possible and economically advantageous.  
73. Environmental Choice was the Canadian national eco -labelling programme.  Although 
delivered by a private company, Terrachoice, the po licy responsibility and oversight rested with 
Environment Canada.  Environmental Choice affixed its symbol to products that it had determined as 
environmentally preferable.  Criteria used by Environmental Choice had been established through a 
multi -stakeho lder consultative process.  Labelling criteria were published semi -annually in the 
Canada Gazette and were subject to a 60 day prior comment period.  Criteria were reviewed every 
3 years to ensure that they remained up to date.  Single -mark eco -labels were  aimed at the retail level, 
where the consumer generally preferred a simple, recognizable mark that a product was 
environmentally preferable to other comparable products.  In contrast to report card environmental 
labels, which simply reported the values of  individual criteria.  Type  I eco -labels ranked products 
within each criteria, set thresholds or hurdles for each criteria, and applied weighting to all criteria, in 
order to identify the 20 -30 per cent of products that were environmentally preferable over all.  
Customers decided on the basis of this third party assessment of the overall environmental 
preferability of the product, rather than making this assessment themselves.  In contrast to most other 
eco-labelling programmes, Environmental Choice consider ed using equivalent test data for the test 
methods specified in its product guidelines  This had been applied in the case of foreign suppliers 
where regulatory requirements differed from Canadian regulatory requirements, but the product was 
judged as being  as environmentally preferable in relation to Canadian products.  Environmental 
Choice followed the procedural and substantive provisions of the TBT Code  of Good Practice.  Its 
consideration of equivalency went beyond current Code  of Good Practice provisio ns. 
74. An example of private eco -labelling could be seen in the Xerox photocopying paper used in 
the WTO.  Xerox, like most large multinationals, had an environmental policy with an in -house 
capacity to evaluate the environmental attributes of its supplie rs.  Private environmental policies 
reflected both corporate objectives of a positive corporate image and environmental performance 
improvements, as well as the general public environmental policy of the region in which the company 
was supplier.  Thus, Xer ox Europe labelled its photocopying paper as "100 per cent Chlorine Free 
bleached."  The level of AOX (Absorbable organic halogens) was set at 0;  the pulp was sourced from 
cultivated forests only (i.e., no old growth harvesting);  and the product and pack aging were 
100 per cent recyclable.  Environment Canada had considered and rejected regulations regarding 
AOX, given other measures that were deemed more relevant, and that SFM was also applied to areas 
which included old -growth trees.  This private label favoured local regulatory requirements and 
production practices, with a real trade impact.  
75. Based upon Canada's experience with the above approaches, the following policy 
considerations and issues were relevant to all.  The following two procedural aspe cts were critical to 
reducing trade concerns.  First, an open and transparent development process provided assurance to 
all stakeholders that the results reflected a balance of interests.  Multi -stakeholder input facilitated 
reaching national consensus.  N ational standards systems generally provided a systematic approach to 
securing consensus from all stakeholders.  Publication of work programmes and comment periods 
provided needed transparency for comment for both domestic and foreign interested parties.   WT/CT E/M/17  
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Secondly, credible, impartial audit processes were crucial to all approaches.  This required that 
standards be as clear, precise and consistent in application as possible, and that the auditing function 
be distinct from consulting or other management servi ces. 
76. First, with respect to substantive aspects, all approaches required adherence to the national 
regulatory framework.  In Canada, this meant both federal and provincial regulations.  Secondly, 
given that life -cycle approaches were still at a relativ ely early stage, there was scope for convergence 
with respect to the basic methodology.  The Canadian Criteria and Indicators provided the basis for a 
common framework for certification given that these represented national consensus and the guidance 
they provided with respect to those criteria and indicators of importance to forest management.  With 
respect to environmental labelling, there was potential for common criteria between Type  I and 
Type  III labels, and thus a common data set that could be used t o set selectivity.  Convergence of 
criteria in labelling could reinforce the credibility of both labelling approaches given that Type  I was 
targeted to retail customers and Type  III industrial customers.  Certification might also become a 
criteria in envir onmental labelling programmes.  However, market -based forces should play their part 
in determining the level of diversity and complementarity/integration of each instrument.  Thirdly, as 
all of these approaches related primarily to process and production m ethods rather than final 
characteristics of products, equivalency between approaches and systems was particularly important.  
With respect to sustainable forest management, buyers that set requirements should, in principle, 
accept that different national S FM standards and approaches existed.  Similarly, Type  I eco -labelling 
programmes needed to take into account different regulatory frameworks that impacted upon process 
or production methods.  Trade problems would be reduced if all approaches took into acco unt local 
forest management conditions and production regulatory requirements in producing countries.   
77. The efforts expanded by governments, industry and other members of civil society indicated 
the degree to which these issues were perceived as being of immediate and longer -term impact.  The 
trade concern can be seen in the following example.  The combination of elimination of tariff 
escalation on paper products between the USA and Canada and structural changes in industry resulted 
in a dramatic absolu te and relative growth of other paper exports, compared to the commodity exports 
of pulp and newsprint.  While each market was different, and structural factors would play different 
roles, Canada sought and obtained zero for zero in paper products in the e xpectation that Canadian 
producers could compete in more than commodity pulp and newsprint exports.  Given the impact that 
certification, standards and labels could have on market access, there was a real concern that 
requirements for some of these instrum ents could undermine the market access negotiated in key 
markets.  It was important to note that the issue was not SFM or good environmental practices.  These 
were shared values that Canada was committed to achieving, in keeping with their broad sustainabl e 
development objectives.  The issue, in the trade policy context, was to ensure that all approaches did 
not discriminate against Canadian or internationally developed processes that addressed important and 
legitimate resource management and process and pr oduction issues.  While the forest products sector 
might be unique in how it had been confronted by trade and environment issues, issues related to 
standards and labelling approaches likely had parallels in other sectors.  This had been illustrated by 
Colo mbia's contribution on its flower sector.  The policy considerations Canada had derived from 
their forestry experience appeared to be horizontal in nature.  Canada hoped that other Members could 
similarly share their national experiences in dealing with th ese and similar issues to further understand 
the trade implications of the various approaches and instruments.  
78. The representative of the European Communities  said that the forestry section might usefully 
have been entitled "The Forestry Sector" to clea rly include forest resources and downstream 
processing industries.  This section could have gained from more specific examples to support the 
general arguments put forward.  Deforestation had little to do with international trade directly and 
more to do wi th expanding demand for food, land tenure patterns, expansion of subsistence 
agriculture, and demand for fuel wood.  Nevertheless, it was important to recognize the indirect, 
initiating effect of even selective logging, which could be fundamental in trigge ring other causative 
agents, especially when concentrated locally.  Although overall figures for the percentage of WT/CTE/M/17  
Page 22 
 
 
roundwood from developing countries entering trade might be low, these statistics masked the 
situation in individual countries where trade in  forest products might be economically important and 
the follow -on effects of trade -related logging.  
79. The representative of the EC said that many references had been made at the NGO 
Symposium to the importance of correct resource pricing.  In the case o f wood, the basic premise of 
WT/CTE/W/67 was that "in well -functioning market -based economies, prices register the relative 
scarcity of resources and consumer preferences" did not always apply.  The document did not 
distinguish between national stumpage va lues set by governments, often for natural or semi -natural 
forest resources, and the growing costs incurred by private forest owners.  Price mechanisms were 
unable to register wood's scarcity or account for non -wood services, including its value for carbon  
storage.  The long period between the production and harvesting of wood meant the wood production 
period might exceed the time horizon of private owners or even some governments.  As a result, some 
countries had established compulsory forest regimes to pr event land from being cleared and used for 
the most profitable purpose in the short term.  A high proportion of benefits from forests were 
non-wood, many were public goods and some forest services were global, such as regulating climate 
or maintaining biod iversity.  It was important to bear in mind that, for forest resources, prices could 
not reflect their optimal use as some of the benefits which arose did not accrue to private owners, the 
present generation or solely to the country where the forest resour ces were situated.  Such benefits 
were difficult to quantify in market terms.  When examining the role of forestry subsidies, different 
steps in the wood production and processing chain should be distinguished.  Subsidies related to 
products "closer to the  market", such as in the furniture industry, might be more distorting than those 
for forestry measures related to the wood production which might be granted 50 -100 years before the 
wood was marketed.  A distinction also had to be made regarding subsidies g ranted for social amenity 
or environmental reasons which might have only limited or localized distortional effects, but which 
might be justified by the non -market benefits accruing.  
80. In the EC's view, reference to tariff peaks in the document had not be en substantiated and it 
was difficult to know to which countries this referred.  The reductions in tariffs cited did not accord 
with the claims about tariff escalation made elsewhere in the document, particularly for the EC where 
paper tariffs were being p hased out over 10 years, while those for wood products persisted at lower 
rates than before the Uruguay Round.  Although the FAO report quoted on trade in forest products 
was still based on (loose) estimates, the analysis did not distinguish trade increase s due to 
liberalization from those driven by other factors such as increasing wealth, literacy, press freedom, 
hygiene standards and industrialization, especially computerization.  It would have been useful to 
examine the effect of import restrictions on e nvironmental technologies which could contribute to 
reducing energy consumption by, and pollution from forest -based industries.  
81. According to the EC, although certification of sustainable forest management and the 
labelling of forest products were compl ementary to forest management, schemes of this nature 
necessarily did not necessarily create uncertainty or additional costs for exporters, nor did they 
constitute trade barriers.  The principles for certification schemes agreed by the Intergovernmental 
Panel on Forests (IPF) were designed to ensure that they did not.  The IPF principles called for open 
access, non -discrimination, credibility, non -deceptiveness, cost -effectiveness, participation of all 
interested parties, sustainable forest management, and transparency.  It was important to examine how 
and under which conditions certification and labelling could contribute to alleviating market failures 
in forestry, for example when sustainably produced wood was in competition with wood exploited 
from natura l resources without consideration to the natural rate of regeneration.  The IPF guidelines 
were a useful reference.  It would have also been appropriate to look at conditions required to make 
trade and environment mutually supportive and to emphasize the c ontribution MEAs could make to 
this end.  
82. The representative of New Zealand  thanked Canada for contributing its national experience in 
the forestry sector.  As a major exporter of forest products, New Zealand had faced a similar range of  WT/CT E/M/17  
 Page 23 
 
 
challenges to t rade in forest products as those indicated by Canada.  It was important to stress the need 
for environmental standards and schemes, such as those outlined in Canada's paper to be voluntary, 
transparent and market based.  The involvement of all relevant par ties in developing these instruments 
was fundamental.  A number of New Zealand forestry firms were working towards complying with 
the ISO 14000 standards;  to date, two had been certified.  He drew attention to the reference in 
paragraph 51 of WT/CTE/W/81 to the recent formation of buyer groups which had a policy to only 
purchase certain certified products.  The paper submitted by Colombia on eco -labelling highlighted 
similar concerns.  New Zealand was concerned that these groups could distort markets and i mpact 
negatively and unfairly on the access of some exporting countries.  There were various tools to 
alleviate problems in this area such as equivalency, which was an issue which would be explored 
further in the TBT Committee as part of the TBT Triennial Review work programme.  It would be 
valuable to examine issues such as those raised by Canada in the context of achieving compatibility 
between Types  I and III eco -labels.  New Zealand would welcome hearing from others who had had 
to face similar challenge s in the eco -labelling area.  
83. The representative of Switzerland  thanked Canada for its contribution which would help to 
better understand the challenges posed in the forestry sector.  The analysis in WT/CTE/W/67 was 
lacking in the forestry section.  The  complexity of the impact of measures such as subsidies or 
certification of forestry products was such that it was difficult to formulate conclusions.  The assertion 
in paragraph 123 that the net growth of income per capita would lead to environmental bene fits had 
not been developed.  This proposition was only valid if additional income was invested in forest 
management, which would only be the case if national policies for sustainable forestry management 
were implemented and the necessary financial means w ere provided to ensure implementation.  The 
direct impact of the elimination of trade distortions on environmental quality was limited, particularly 
for already low tariffs.  
84. The representative of Japan  said that trade liberalization in the forestry sec tor had the 
potential to result in environmental degradation if forests were not managed appropriately.  
WT/CTE/W/67 argued that if adverse production and consumption externalities were adequately 
integrated into the decision making process, trade and envi ronmental objectives were mutually 
supportive.  However, in many cases, externalities had not been considered in policymaking, which 
revealed that the simplified policy of removing subsidies and other so called "trade distorting 
measures" could cause negat ive environmental impacts.  Market and price mechanisms did not always 
contribute to environmental conservation.  The figure on page 59 was too optimistic;  the assumption 
indicated that the level of logging was below the sustainable level, with the demand  curve shifting 
right in response to a rise in demand.  WT/CTE/W/67 noted that an increase in wood production 
increased incomes which, in turn, led to conservation and that, therefore, trade liberalization was 
necessary;  this was not necessarily correct.  Conflicts on forestry including between developed and 
developing countries were arising from logging of natural forests.  Many cases existed in which it 
could not be expected that increased logging would consider the scarcity of forestry resources.  The 
CTE should pay more attention to this feature of natural forests.  Although paragraphs 113 and 114 
noted that removing tariff escalation could contribute to environmental improvement, even with the 
implementation of advanced processing in exporting countrie s, excessive logging in response to 
market demand might lead to overexploitation in the absence of sustainable forest management 
policy.  There was no empirical justification concerning the linkages between abolishing tariff 
escalation and forest conservat ion. 
85. Japan's imports of wood were as high as 80 per cent of total domestic wood consumption.  
Timber trade had invited severe criticism from many environmentalists.  Forests played a significant 
role in the environment of each country and region in ter ms of conservation of biodiversity, land and 
water resources, and landscape, particularly in countries where forests accounted for a large share of 
total land.  Importing country environments and not only that in exporting countries had to be 
considered.  WT/CTE/W/67 quoted from an OECD report by Barbier and a book by Gillis and 
Repetto, but failed to include the arguments they contained on the low recovery rate in the plywood WT/CTE/M/17  
Page 24 
 
 
industries in tropical wood exporting countries, a sector which was protected by export restrictions.  
This caused an inefficient use of tropical timber.  The references to the adverse environmental effects 
of export restrictions described in these studies were not noted in WT/CTE/W/67.  Paragraph 114 read 
as if industries in importing  countries were inefficient and the logic on export controls, which 
contradicted Barbier and Repetto.  Concerning the proposal in paragraph 119, quotas were already 
prohibited by the WTO.  Paragraph 127 referred to the issue of formaldehyde glue, which ply wood 
manufacturers were using less of given its negative effects on human health.  The formaldehyde issue 
had nothing to do with import regulations.  Japan would submit written comments with its suggested 
revisions.  He referred to the international proces ses to define criteria and indicators for sustainable 
forest management, such as the Montreal process and in the ITTO.  Criteria and indicators would vary 
from country to country reflecting differences in environmental and social conditions.  These 
differe nce should be as small as possible;  this was important from a trade viewpoint. Implementation 
of criteria and indicators should be transparent.  The CTE should contribute to the implementation of 
criteria and indicators.  
86. The representative of Australi a noted the reference in the forestry section of WT/CTE/W/67 
to the significance or wood fuel production to forestry as a whole.  The document cross referenced 
this to references to wood fuel in the energy section and the possible impact of reform of energ y 
market distortions on wood fuel logging,  This illustrated the many cross sectoral linkages, which 
related to the overall linkages between economic and environmental factors.  Four main types of 
policies warranted examination in relation to the forestry sector.  The first of these was tariff 
escalation.  While the differential between tariffs on raw logs and those on processed wood products 
was being reduced significantly by the Uruguay Round tariff commitments, there were still important 
degrees of tarif f escalation in relation to some wood products and furniture.  From an environmental 
view, this was important as tariff escalation could reduce the trade revenues gained by countries 
dependent on forestry exports and limit their opportunities to diversify production.  Canada's paper 
had noted the effects of the elimination of tariff escalation between Canada and the U.S. and the 
contribution this had made to industrial changes in relation to pulp processing, which had economic 
and environmental benefits.  A  second set of policies were export restrictions, which might be aimed 
at addressing forestry conservation concerns or encouraging domestic processing industries.  An 
important question was the extent to which such trade measures were effective in promotin g good 
environmental outcomes.  A third set of interventions concerned the levying of stumpage fees and 
charges on timber cutting.  The extent to which such fees were levied might not only affect the trade 
competitiveness of different sources of timber sup ply, but also the ability of governments to finance 
adequate resource management regimes.  Inadequate fees might also encourage excessive timber -
cutting through failing to reflect the true environmental value of timber resources.  A fourth set of 
policies and measures consisted of initiatives aimed at influencing consumer markets and demand, 
including eco -labelling schemes or recycled content requirements.  While the intention was to harness 
consumer buying power in promoting improved environmental outcomes , these measures raised 
issues on their effectiveness, trade impacts and whether they could be designed to adequately take 
account of differences in individual country circumstances.  
87. In Australia's view, a number of major concerns had been raised about  the environmental and 
trade effects of all four sets of interventions.  There were clearly significant distortions in the timber 
and wood products' markets and there would seem to be considerable scope to improve the workings 
of these markets.  A key obje ctive for the CTE should be to identify multilateral reform efforts on 
issues such as tariff escalation or remaining tariff peaks, which would provide a more supportive 
international framework for achieving more sustainable forestry outcomes.  Clearly, oth er policy 
reforms and well targeted domestic environmental policies would be needed to move towards more 
sustainable forestry practices.  Australia would comment on Canada's paper, which was useful in 
advancing understanding of certification and labelling approaches, at a future meeting. Australia 
hoped others would similarly contribute their national experiences, including the details of 
programmes and practices to market access changes and environmental impacts.   WT/CT E/M/17  
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88. The representative of Malaysia, on beha lf of ASEAN , said that WT/CTE/W/67 set out the 
various trade restrictions and distortions in the forestry sector.  Continued tariff escalation and tariff 
peaks on forestry products in some importing countries acted as a deterrent to producer countries, 
particularly developing countries, in their efforts to diversify into higher value -added forestry 
products, and could have downside effects on forestry conservation and management.  Forestry had a 
multifarious role in the economic development of developing co untries.  ASEAN saw the need for the 
existence of export controls in this sector to help reduce pressures to harvest forests.  Certification 
should be tied to technology transfer, including in areas such as R&D and concerning greater 
opportunities to study  environmental economics and forestry management.  The increasing array of 
approaches to forest certification also had to be addressed.  
89. ASEAN thanked Canada for its national contribution.  Important as forest conservation was to 
the discussions of the CTE, Members should be careful not to exaggerate the environmental benefits 
of trade liberalization.  Given the absence of an internationally agreed definition of sustainable forest 
management, efforts to ensure that forestry products were only from sustai nably managed forests 
could lead to negative market access effects.  It could also result in the increased use of substitutes 
such as plastics, and  aluminium whose production, use and re -use, and disposal also had 
environmental implications.  ASEAN expres sed its concern on the recent initiative of the Dutch 
Government to label forestry products.  Although, this regulation was applicable to all types of timber 
products, ASEAN felt it was not trade -neutral.  In this respect, ASEAN would appreciate clarificat ion 
from the EC.  
90. The representative of the United States  appreciated Canada's presentation of its national 
experience as a way to bring as much relevance as possible to CTE work.  Deforestation whether 
spurred by subsidies removal or international trad e activities, however indirectly, contributed to 
climate change.  Regardless of the perceived minimal effects of subsidies on trade, as suggested in 
WT/CTE/W/67, any contribution to climate change should be considered significant.  Paragraphs 74 
and 123 ha d not sufficiently stressed the significance of increased deforestation, it was not certain that 
the direct or indirect trade effects of removing subsidies, however necessary, were as minimal as 
suggested.  
91. The representative of India  said that in India  the forestry sector was generally characterized in 
terms of its use for fuel by a large part of the population, especially those living below the poverty 
line.  India agreed with the statement in paragraph  123 of WT/CTE/W/67 that deforestation had little 
to do with international trade and that competent relevant international organizations were dealing 
with this matter.  Since there was little link between deforestation and  trade, any proposal for having 
the CTE formulate criteria on sustainable forestry management should not be considered in the WTO;  
this should be done by other relevant international fora.  He thanked Canada for its contribution which 
illustrated Canada’s national experience in forestry and was of educational value to the CTE.  On 
footn ote 1 of the paper, India did not share Canada's interpretation that eco -labelling based on non -
product -related PPMs was covered by the TBT Agreement.  India was interested in the description of 
the development of certification programmes for Canada's fore stry sector based on environmental 
considerations and would be interested to know more on how Type  I eco -labels accommodated 
evolutions in the production phase related to changes in technology which took place in less than 
three years.  He asked how commen ts received on the proposed criteria were taken into account, and 
if the source of comments which were not accepted were provided with an explanation.  
92. The representative of Egypt  thanked Canada for its contribution.  As noted by India, the issue 
of the  applicability of the TBT Agreement referred to in footnote 1 of Canada's paper was 
controversial.  Egypt did not agree that non -product -related labelling was covered by the TBT 
Agreement.  The reasons for this were the lack of explicit reference to eco -labelling;  the 
incompatibility of TBT definitions on technical regulations and standards to most eco -labelling 
programmes;  and the fact that the TBT Agreement did not cover non -product -related PPMs.  WT/CTE/M/17  
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93. The representative of Ecuador  said deforestation occ urred as a result of poverty and based on 
the fact that forests were not correctly valued.  The price of raw tropical timber was significantly 
lower than for processed tropical timber products.  Although trade was not a cause of deforestation, it 
could pro vide a means to address deforestation problems.  
94. The representative of Canada  said that, although the message of the graphic on page 59 of 
WT/CTE/W/67 was correct, the forest management economics it portrayed were oversimplified.  
95. The observer of FAO  noted the variations in interpretations on forestry issues, including the 
links between trade and environment.  The FAO was carrying out work in related areas and welcomed 
the opportunity to cooperate with the WTO where appropriate.  
Non-ferrous metals  
96. The representative of Canada  said WT/CTE/W/67 was useful in setting out the non -ferrous 
metals sector.  She emphasized the environmental benefits of a level playing field in this sector in 
terms of removing subsidies, tariff and non -tariff measures.  Ther e were economic and environmental 
benefits of recycling non -ferrous metals including trade in recyclables.  Many countries will require 
increasing amounts of non -ferrous metal commodities to enable them to develop infrastructure to 
support modernization, p articularly developing countries.  Recycling materials can play an important 
role in making these commodities available at reasonable prices.   In this light, trade measures, 
whether domestic or multilateral, which distorted trade in recyclables would have  negative economic 
impacts and frustrate the development of the recycling industry.  This could have a significant 
negative environmental impact.  
Textiles and clothing  
97. The representative of India  said paragraph 174 of WT/CTE/W/67 correctly characterize d the 
quantitative restrictions maintained under the MFA as a significant trade distortion in this sector, 
which had a major impact on developing country exports.  For developing countries which depended 
on textiles and clothing exports, such distortions h ad direct impacts on their attempt to benefit from 
trade liberalization and devote more resources to development, leading to environmental problems 
brought about by lower living standards.  Restrictions on the acquisition of environmentally sound 
technolog y, due to resource and protection constraints on technology transfer added to the problem.  
Environmental requirements, such as labels on imports of textile and clothing products from 
developing countries, were another trade barrier, which India would refe r to under Item 3(b).  As 
noted in paragraphs 175 -176, the phase  out of the MFA posed further problems, since the removal of 
quantitative restrictions had been limited to a few items, with the bulk of these restrictions still to be 
removed at the end of th e transition period.  Ensuing environment benefits from MFA phase  out, 
noted in paragraph 179, would not occur until 2005, at the earliest.  Until then, developing countries 
had to wait for the general welfare benefits noted in paragraphs 180 and 181.  On paragraphs 182 and 
184, textiles and clothing trade was not limited to cotton fibres;  the analysis might explore the use of 
other fibres, including manmade fibres.  In such a broader debate, environmental impacts would have 
to take into account both the p roduction and final disposal of textile and clothing products.  As in 
other sectors, discussion should also address the impact of any suggested environment -related action 
for developing country SMEs, especially for the transfer of environmentally sound tec hnology on 
commercially viable terms.  
98. The representative of the European Communities  said that WT/CTE/W/67 provided a basis 
for the discussion on textiles and clothing.  The document referred mainly to cotton;  the inclusion of 
synthetic fibres and woo l would have resulted in a broader and more balanced coverage.  The analysis 
appeared to underestimate developing countries share of world textiles trade as it measured trade by 
value rather than volume, which was of interest from an environmental perspect ive.  Given that the 
dying and chemical finish of products were the most important individual factors in this sector which  WT/CT E/M/17  
 Page 27 
 
 
had an environmental impact, the document could have devoted greater attention to this aspect.  
Liberalization in this sector had not  yet resulted in an increased use in developing countries of 
environmentally friendly technologies, which was an element which should be examined further.  
99. The representative of the United States  said the textiles and clothing industry could be 
environm entally stressful.  This was not a reason to suggest that liberalization should not occur, but it 
was useful to flag for policymakers that as liberalization was occurring there may be a need for 
complementary measures to ensure that the environment did not  suffer as a result.  The US was 
perplexed by the suggestion in paragraph 186 that the phase  out of the MFA would lead to production 
based on comparative advantage instead of trade restrictions.  Certainly the MFA phase  out would 
result in the elimination of an important category of restrictions, but as stated in paragraph 180, 
relatively high tariffs would still remain particularly in developing countries, which were becoming 
increasingly important markets for textiles and clothing products.  This was an i ssue particularly for 
SMEs.  The document could have usefully examined non -tariff measures such as import licensing and 
prohibitions.  
100. The representative of Egypt  asked the Secretariat to provide information on the ratio of output 
per cent for natural  fibres like cotton as opposed to synthetic fibres in the overall world production of 
textiles and clothing.  It was very important not to blow this issue out of proportion by concentrating 
on the environmental effects resulting from the methods applied on ly for cotton production.  Egypt 
depended heavily on production of cotton as an export commodity.  Without technical assistance and 
cooperation to support its policies to switch to environmentally friendly technology, removing 
subsidies would be detrimenta l to this sector of Egypt's economy.  He referred to paragraph 6 of 
WT/CTE/W/67 and the 1996 Report of the CTE concerning the wide agreement concerning the close 
linkage between poverty and environmental degradation.  
101. The representative of Indonesia, o n behalf of ASEAN , attached importance to the  
relationship between textile and clothing trade and the environment.  The data provided in 
WT/CTE/W/67 noted the importance of textile and clothing for developing countries as illustrated by 
the increasing sha re of production in total domestic manufacturing output.  He agreed with the view in 
paragraph 170 that this sector had for many years been heavily influenced by numerous trade 
distortions.  Removing high tariffs would enable developing countries to earn t he necessary capital to 
allocate resources to the most efficient use and to the most environmentally sound technology.  Most 
developing countries textile producers were SMEs and without the capital generated from increased 
exports, they would face difficul ties in complying with environmental standards.  Paragraph 179 
reflected the need to phase  out the MFA, which was one way of removing trade distortions in this 
sector and ensuring environmental benefits.  ASEAN agreed with this view since the removal of tr ade 
distortions would lead to industrial restructuring and new investment would provide the possibility to 
introduce more environmentally sound production processes and machinery.  He noted the importance 
of the transfer of environmentally sound technology  to developing countries.  ASEAN felt that trade 
restrictions hampered developing country capability to produce environmentally friendly textiles and 
clothing products.  
102. The representative of Hong Kong, China  shared the views of India, Egypt and ASEAN,  
particularly on the opportunity for "win -win" situations in the textiles sector.  It was necessary to 
address tariff peaks in this sector.  Paragraph 177 of WT/CTE/W/67 noted the high tariff rates 
maintained by textile and clothing importing countries, wh ich were three times higher than other 
industrial products.  To the extent that there may be an occasion to tackle industrial tariffs in broad 
based negotiations, textile tariffs by importing Members should be addressed.  In the case of textiles, 
there was  a double trade restriction given that this sector was also subject to quantitative restrictions.  
There were tariffs peaks in importing countries which were higher than those maintained by certain 
exporting countries.  Pages 47 to 49 provided a list of tr ade restrictions on trade and investment in the 
textiles and clothing sector.  However, mention was not made of the use of governments of certain 
trade measures which were less visible than quotas, tariffs or subsidies, but which had similarly WT/CTE/M/17  
Page 28 
 
 
adverse effe cts on investment.  Such measures may incur changes in rules of origin which created 
added trade barriers in this sector.  This had an impact on trade flows and created uncertainty for 
exporters, thereby adversely affecting investment.  Investment was an i mportant issue as the use of 
more environmentally sound technologies had not been evident following the liberalization of textile 
trade.  
103. The representative of Hong Kong, China asked to what extent had liberalization in textile 
trade been achieved sinc e 1995.  In so far as there existed trade uncertainties which could create 
investment risks, the opportunity to invest in the latest technology in the textiles sector had not been 
used.  Paragraph 167 of WT/CTE/W/67 noted the significant structural changes  which this sector had 
undergone for over three decades.  A proactive government role was warranted, particularly in 
importing countries, to facilitate continuous industrial adjustment and the adoption of more 
environmentally sound technology in this secto r not only for the economic health of the industry but 
also to improve environmental quality.  There had been a lack of enthusiasm on the part of some 
importing Members to pursue the adjustment issue, although this issue had often been raised.  
104. The rep resentative of Pakistan  said paragraphs 172 and 173 of WT/CTE/W/67 implied that 
quotas under the MFA might have had a beneficial effect.  While quantitative restrictions on textiles 
had not affected every country to the same extent, even a partial list wou ld include the following 
costs:  limitation of competitive exports, transfer of resources to less efficient lines of production, 
discouragement and distortion of investment, and quota rents.  The literature on textiles trade was 
replete with examples of th e quantified costs of quotas for importers and exporters.  He said the 
estimated costs of the net welfare costs of MFA for importing countries ranged from US$2.4  billion to 
14.8 billion.  Whereas estimates to exporting countries in terms of their foregone export revenues 
were estimated to be US$5.8 -6 billion per annum.  Quantitative restrictions on textiles had led to 
misallocation of resources and loss of economic welfare in both importing and exporting countries.  
Leather  
105. The representative of Brazil   noted that the leather section in WT/CTE/W/67 was presented in 
a satisfactory way.  Trade liberalization in this sector could result in environmental benefits for all 
countries, including Brazil.  In addition to the points raised in WT/CTE/W/67, trade lib eralization 
could lead to the diffusion of cleaner technologies throughout the different stages of leather 
manufacturing in exporting countries.  It could also lead to innovation in end -of-pipe technologies for 
the treatment of industrial residuals.  The i ncrease in economic and financial resources resulting from 
liberalization may also yield resources for environmental investment.  At the same time, the growth of 
tax paying companies may allow Governments to better allocate resources.  As noted in the sect ion on 
environmental services, the market was expanding for environmental goods and services in 
developing countries.  The Brazilian leather private sector noted that UNIDO and UNEP had 
established a National Cleaner Production Centre in Porto Alegre, Braz il, which would benefit the 
development of Brazil's leather industry, particularly SMEs.  
106. The representative of India  said this sector should be discussed further, keeping in mind the 
need to examine the impact of non -tariff measures on developing coun tries, noted in paragraph 195 of 
WT/CTE/W/67.  He noted the environmental impact of trade liberalization in the leather industry, 
including the increased costs for developing country producers, especially SMEs, noted in 
paragraph  200.  A related issue was the easy facilitation of the transfer of environmentally sound 
technology for SMEs to enable them to lessen the environmental impact of production.  
Environmental services  
107. The representative of the European Communities  said that his delegation had give n some 
thought to the relationship between trade and environment, particularly on achieving environmental 
benefits, much of which was reflected in WT/CTE/W/67/Add.1.  Attention to environmental issues,  WT/CT E/M/17  
 Page 29 
 
 
which were increasingly important in international aff airs, was one of the keys to measuring further 
economic progress and success not only in the WTO but in any international or domestic initiative.  
The CTE should analyse how to achieve concrete and credible results in this respect.  There was 
something to be said for looking at the way in which industry had responded to the challenge of 
regulation, to market opportunities based on the fact that environmentally sound could be 
economically sound in the long run.  Industry was being creative in developing new products, 
technologies and services which had environmental benefits.  This development was not only true in 
Europe, but also elsewhere.  From a brief survey of European industry, responding to environmental 
concerns meant developing new products which wen t hand in hand with the development of new 
packages of products and services so as to contribute to projects on preserving or improving 
environmental quality.  There was thus a case for a common approach to better define what 
constituted the environmental industry, which was a combination of many elements:  news products, 
technology, know -how and manpower.  In this respect, WT/CTE/W/67/Add.1 made a start.  There 
was a need to further the debate on possible rules in this area.  Recent jurisprudence might pro vide a 
basis for re -visiting Article XX;  on GATS Article XIV, the EC reserved its position pending further 
examination.  
108. In EC's view, preliminary analysis of WT/CTE/W/67/Add.1 indicated that aspects could be 
refined.  Analytical work would be useful on the environmental benefits, focusing on factors affecting 
the demand for environmental services.  The potential environmental benefits from removing trade 
restrictions and distortions in this area had not been clearly spelt out (e.g. broader availabilit y of 
environmental services, lower prices through increased competition between domestic and foreign 
suppliers).  It should be more clearly defined what was meant by environmental services drawing on 
the GATS list of CPC codes and definitions supplied by s ome Members, as well as other fora's work.  
A more precise classification was not a pre -condition to pursue analytical work to identify trade 
restrictions and distortions.  It would be necessary to identify the linkages between environmental 
goods and serv ices and the ways in which they were supplied.  It would also be useful to review the 
scope of the CPC to verify whether the present list sufficiently reflected the current economic reality 
and technological developments.  
109. The representative of Canada  welcomed WT/CTE/W/67/Add.1 which summarized various 
fora's work on the environmental goods and services sector.  Environmental goods and services 
constituted a closely linked package.  Canada was active in pursuing the idea of trade liberalization in 
this sector in APEC.  Concerning work in the WTO, Canada sought wherever possible to have 
discussions on trade and environment focus on concrete situations.  As such, Canada was interested in 
pursuing further WTO discussions on trade liberalization in environme ntal goods and services.  
110. The representative of the United States  said WT/CTE/W/67/Add.1 confirmed the importance 
of the environmental goods and services sector and the link between work in this area and finding 
complementarities between environment an d trade.  It was noteworthy that NGOs at the Symposium 
had referred to this sector as one in which an important contribution could be made by the WTO.  A 
definition of this sector was evolving in APEC and the OECD.  He hoped the CTE would continue to 
focus  on this sector and that concrete results could be achieved.  
111. The representative of Norway  said there was reason to believe that easier access to cheaper 
environmentally sound goods, services and technologies would ease the implementation of 
environmen tal policies in all countries.  
112. The representatives of Japan , Indonesia, on behalf of ASEAN , and  India  said they would 
comment on WT/CTE/W/67/Add.1 at a later stage.   
113. The observer of UNCTAD  said that UNCTAD will hold an expert group meeting on 
strengthening the capacities of developing countries to develop their environmental services sector on 
20-22 July.  The UNCTAD Secretariat's background note for this meeting would focus on the trade WT/CTE/M/17  
Page 30 
 
 
and development dimension, including demand generated fact ors for environmental services in 
developed and developing countries;  GATS commitments and rules on public procurement;  export 
opportunities for developing countries;  actual or potential trade barriers;  and capacity building.  
114. The observer of the OECD said that the OECD Secretariat had made available the 
forthcoming publication on the environment industry of its joint working party with Eurostat for the 
preparation of WT/CTE/W/67/Add.1.  This sector was a dynamic area in which there was a 
significan t amount of work currently ongoing.  Environmental policymaking had progressed 
considerably in recent years and it was important to emphasize that the environmental goods and 
services industry did not only include end -of-pipe goods and services, but also i ncorporated cleaner 
technologies and processes.  One industry analyst had commented that the environment industry was 
less of a sector than an agglomeration of providers of many types of goods, services, and technologies 
which were usually integrated into production processes and often hard to separate.  In this 
connection, he drew attention to paragraph 13 where it was mentioned that the OECD classification 
list aimed to allow for future structural changes such as shifts from end -of-pipe to cleaner 
technol ogies and processes.  Concerning the comments made by the EC on the CPC, which had 
provided the basis for the GATS negotiations, he said that in light of new developments, the CPC was 
being revised.  To the list in paragraph 20 which set out that environme ntal services covered other 
areas such as engineering, construction, research and development, he would add consulting.  
General comments on Item 6  
115. The representative of Switzerland  said that the environmental effect which might result from 
removing tr ade restrictions was a complex issue, which was partly due to the absence of 
comprehensive environmental valuation techniques but also to the many factors which had to be taken 
into account.  The complexity of the subject was reflected in WT/CTE/W/67.  The  document did not 
address whether or not trade liberalization put more pressure on national governments to reduce their 
environmental standards if they wanted to maintain competitiveness of their industries.  For example, 
the diagram in the Annex showed ho w different policy tools could increase environmental benefits.  
At the end of the paragraph, it was stated that a tax could be used to increase the price from PE to PL 
in order to internalize the external costs, PL being the price of the sustainable fores try level.  
However, what was not discussed was that such a tax tended to reduce the competitiveness of the 
taxed producer.  
116. In Switzerland's view, WT/CTE/W/67 could have provided a basis for discussing how the 
multilateral trading system could be impr oved with a view to enhance the positive (and to limit the 
negative) environmental benefits associated with trade liberalization.  All possible and hypothetical 
environmental benefits were enumerated, with little effort to evaluate their relative importanc e.  In 
paragraph 8, it was acknowledged that "removing trade restrictions and distortions was rarely 
synonymous with an unambiguous improvement in environmental quality".  This fact was, however, 
practically ignored in the rest of the document.  In fact, t he rest of the document built on the 
assumption that trade liberalization unambiguously improved environmental quality, which was not a 
balanced approach.  Negative environmental effects were treated marginally, even if their relative 
importance could be c rucial (for example, in paragraph 43 on transportation, the OECD had found 
that 30 per cent of CO2 emissions were due to transportation).  Switzerland thought that it was 
important to have the full picture of the effects caused by the removal of trade dist ortions and 
restrictions, even if Item  6 only mentioned the environmental benefits of removing such measures.  
However, the terms of reference clearly allowed Switzerland to raise any relevant issue relating to the 
work programme.  
117. Similarly, income gr owth effects were assumed to be strongly positive (paragraphs 11 
and 37);  this assumption was insufficiently substantiated.  The studies cited in footnote 5 did not 
permit any unambiguous conclusions to be drawn.  The question whether economic growth enta iled 
net environmental benefits remained open, and Switzerland wondered where and under what  WT/CT E/M/17  
 Page 31 
 
 
assumptions an unambiguous result would have been found, as suggested in paragraph 11.  In this 
context, there was an unfortunate typing error in the first sentenc e of footnote 5, where "an inverse 
relationship" should read "an inverse u -shaped relationship".  The OECD had found that a strong 
positive correlation existed between CO2 emissions and income.  
118. Switzerland found the use of the term "subsidies" in the document problematic.  Subsidies 
were treated as systematically wrong and distortive.  For example, paragraph  70 stated that "[b]y 
distorting prices, energy subsidies exacerbate environmental problems", and paragraph  101 stated that 
"[s]ubsidies removal [. ..] represents a necessary step towards removing the most prevalent economic 
instrument hampering the achievement of sustainable fisheries management".  Switzerland agreed that 
subsidies which encourage the use of environmentally damaging production method s or the 
consumption of polluting substances should be removed.  However, the document did not recognize 
that there existed also corrective or "Pigovian" subsidies which were designed to improve resource 
allocation and increase efficiency.  The document im plied that essentially all subsidies should be 
removed.  Switzerland recalled that WTO Members had never reached such a conclusion.  To the 
contrary, they had acknowledged the fact that, if certain conditions were fulfilled, taxes and subsidies 
were legiti mate policy instruments.  It should be emphasized that "non -specific" subsidies in the sense 
of the WTO Subsidies Agreement should not be regarded as distortive.  The document did not 
recognize that subsidies, in general, and direct income payments to farm ers, in particular, could be - 
and, in some cases, were - made contingent on environmental criteria.  Switzerland had made this 
point for the agricultural sector.  
119. Paragraph 66 stated that "[i]t is generally felt that the removal of subsidies and the 
restructuring of taxes to bring energy prices in line with marginal costs could result in significant 
environmental benefits".  For Switzerland, in order to minimize the negative environmental effect, 
energy prices should be brought in line with social cost s.  This meant that prices should not only 
reflect marginal productions of energy but also environmental costs.  It was not appropriate to express 
unsubstantiated "feelings" in the document, especially in view of the fact that "caution is required 
when dra wing conclusions about the environmental impact of energy policy reform" (paragraph 70).  
The energy section was more balanced than the rest of the document.  The forestry section stated that 
"deforestation had little to do with international trade" (parag raph 123).  How did the Secretariat 
explain the fundamental difference between agriculture and forestry with respect to their relation to 
international trade?  Why did the Secretariat call for "domestic resource management policies to 
protect forest resour ces and raise the value of forest products" (paragraph 126), but it did not 
correspondingly call for "domestic resource management policies to protect agricultural resources and 
raise the value of agriculture products"?  Switzerland said that the removal o f trade restrictions and 
distortions would not automatically result in environmental benefits.  The elimination of such 
measures will only have positive environmental effects if appropriate national environmental policy 
were already in place.  
120. The repr esentative of Cuba, on behalf of Bolivia, Cuba, El Salvador, Honduras and the 
Dominican Republic , said that Agenda 21  highlighted that the achievement of sustainable 
development called for solution of environmental problems as a whole.  Since environmental  
responsibilities were of a global nature, efforts to solve them would have to be shared in accordance 
with the level of development of each country.  The process of development will not gain momentum 
if the global economy lacked flexibility and dynamism r esulting from trade liberalization.  Trade 
should be multilateral and open as well as equitable, secure, non -discriminatory and predictable.  
Although developing countries were trying to adopt higher standards of environmental protection, 
they should never  be dealt with from the same viewpoint as developed countries.  Patterns of 
production and consumption originating in industrialized countries were among the main causes of 
environmental degradation.  Thus, trade liberalization would be beneficial to devel oping countries to 
the extent it developed in a climate in which:  the deterioration in the terms of trade disappeared;  
countries respected the Rio commitments and complied with their commitment to devote 0.7 per cent 
of GDP to ODA;  and developing countr ies were given access to technology.  Developing countries WT/CTE/M/17  
Page 32 
 
 
should not be marginalized by trying to establish common environmental standards in different 
national contexts.  The establishment of unilateral, restrictive and extraterritorial trade measures mu st 
be replaced by multilateral cooperation.  Instruments such as eco -labelling and packaging regulations 
should not be used as technical barriers to trade.  It was also necessary to achieve transparency to raise 
domestic capacity on these matters.  He requ ested that CTE documentation be circulated in advance 
of the meetings in all WTO official languages.  
121. The representative of Mexico  supported Cuba's statement on behalf of several Latin American 
countries and noted the progress achieved in the discussio n.  Identifying "win -win" situations should 
be the central task of the CTE with respect to the second part of Item 6.  The WTO's mandate was to 
facilitate trade according to the principles of non -discrimination, transparency and predictability.  The 
elimin ation of trade restrictions and distortions, such as subsidies, would be beneficial to trade and 
was a necessary step to bring the multilateral trading system into a balanced and equitable state for all 
countries.  The analysis in WT/CTE/W/67 as well as Me mbers' national sectoral experiences 
suggested that eliminating trade restrictions and distortions could also result in complementary 
environmental benefits.  As noted in the 1996 Report of the CTE, environmental problems required 
environmental solutions.  Above all, the implementation of environmental and resource management 
policies, which were effective and appropriate at the national level, was a prerequisite to finding 
solutions to environmental problems.  In no case should trade policies be applied as  a substitute for 
well-designed, appropriate environmental policies to solve environmental problems or issues related 
to conservation or resource management.  
122. In Mexico's view, this was a complex subject which would require time to examine.  The 
exchan ge of views from a sectoral perspective as a basis for the discussion under Item 6 was useful, 
keeping in mind that the list of sectors being analysed was an illustrative, not exhaustive list.  By 
discussing sectoral examples, the CTE should not adopt a na rrowly defined sectoral perspective of 
trade and environment issues.  She agreed with the EC that any conclusions resulting from the 
analysis would have to be applied horizontally, not just on a sectoral basis.  Mexico gave importance 
to the horizontal nat ure of the rules which governed trade to ensure that all countries were able to 
participate.  In terms of subsidies, agriculture was the only sector which, however unfortunately, had 
been given special treatment in the WTO.  This sector would have to be re viewed in the context of its 
own specific nature in the WTO and would require greater emphasis in the analysis.  
123. The representative of India  said the sectoral discussion in WT/CTE/W/67 was useful in 
addressing the second part of Item 6.  On the first p art of Item 6, he suggested further discussions 
along the lines of India's non -paper (dated 20 June 1996) to evolve the means for safeguarding and 
enhancing developing country's market access.  An integrated discussion on Item 6 would help the 
CTE to addre ss its mandate from the correct perspective.  India supported the view expressed by 
Cuba, on behalf of several WTO Members, especially on the need for a differentiated approach for 
developing countries, keeping in mind the objectives of sustainable develop ment.  Paragraph 3 of 
WT/CTE/W/67 correctly noted that trade liberalization was not the primary cause of environmental 
degradation, nor were trade instruments the first best policy for addressing environmental problems.  
Regarding indirect benefits of remo ving trade restrictions and distortions, it was important to keep in 
mind that if these restrictions were addressed to policy options entailing trade liberalization, 
"win -win" situations could still be expected.  In paragraph  4, resource misallocation had been 
discussed and it had been stated that distorted prices could obscure the abundance of underutilized 
environmental resources.  This point should be pursued further to examine the optimal utilization of 
resources, particularly where they were available in developing countries.  Availability of certain 
fibres, such as jute, and other resources in developing countries could be identified as areas where 
removing trade restrictions could help to achieve sustainable development.  
124. India noted that in parag raph 6, the linkage between poverty and environmental degradation 
had been emphasized.  Measures for ameliorating poverty in developing countries should be discussed 
in line with the recommendations of the 1996 Report of the CTE in paragraphs 173, 196 and 199 of  WT/CT E/M/17  
 Page 33 
 
 
WT/CTE/1 as well as in India's non -paper on this subject.  This raised the issue of the prompt and full 
implementation of the Uruguay Round commitments as noted in paragraph 7 of WT/CTE/W/67.  In 
paragraph 8, it was stated that removing trade restri ctions and distortions might not itself be a 
guarantee of improved environmental quality.  While that was true, a distinction was necessary in the 
discussions of the CTE between these aspects of environmental quality which could be addressed 
through the mu ltilateral trading system (like trade liberalization) and those which could not (like 
differing absorptive capacities) for the purpose of drawing conclusions on each sector in the 
document.  Paragraph  9 appeared to undermine the value of trade in environme ntal goods and 
services.  Paragraph 11 noted that such trade exceeded US$250  billion.  For developing countries, 
there might be much to gain in market access terms if such trade were directed towards their 
production of environmentally sound goods and serv ices.  In the same context, as regards the welfare 
gains from trade liberalization discussed in paragraph 10, the phenomena could be broadened to the 
global level to optimize production;  what was needed was a globally consistent policy to drive home 
the b enefits.  If civil society was concerned about environmental degradation and interested producers 
were in favour of trade restrictions, such a political constituency could facilitate the task of furthering 
sustainable development.  
125. The representative o f Brazil  welcomed the fact that the CTE was moving beyond rhetoric to 
analyse concrete cases of "win -win" situations.  WT/CTE/W/67 represented a good start to move the 
discussions towards dealing with the substance of the issues.  Further progress would de pend on 
Members' contributing their national experiences, not only on concrete problems, but also on potential 
solutions to these problems.  Brazil's discussions under this cluster had been based on an effort to 
make a contribution in the agricultural, lea ther, and energy sectors.  In the agricultural sector, soya 
was an example of a "win -win" situation.  The cases of ethanol in the energy sector and leather 
represented two more specific areas in which the potential existed for "win -win" outcomes.  Brazil 
would comment on other sectors under Item 6 in the future.  
126. The representative of Turkey  said that under Item 6, market access and trade liberalization 
had been approached from an environmental perspective, one of the core subjects of CTE work.  As 
such, and because of the challenges this presented, it was of particular interest to Turkey.  The CTE 
had made significant progress in search of ways in which the WTO could contribute to making trade 
and environment mutually supportive through trade liberaliza tion and economic development.  
General issues had been identified and a sectoral approach had been followed to analyse the 
challenges and opportunities associated with these issues.  WT/CTE/W/67 contributed to broadening 
and deepening the analysis;  the s ectors covered were important and Turkey would comment on them 
at a later stage.  There was a positive relationship between removing trade restrictions and 
environmental improvement. Trade expansion through liberalization reduced poverty and encouraged 
the efficient use of natural resources.  Market liberalization led to an increase in availability of 
environmentally friendly goods and services and provided technology and financial resources to 
address environmental problems.  However, trade liberalization did not guarantee environmental 
protection and trade measures were not the best instruments to address environmental problems.  For 
the objectives of trade and environment to be mutually supportive, trade liberalization should be 
accompanied by appropriate  environmental policies.  Sufficient attention had not been given to energy 
transportation in relation to the environment, which had serious negative environmental effects.  
Environmental benefits resulting from the removal of trade restrictions were likel y to vary between 
countries. A comprehensive analysis which aimed to find "win -win" situations should avoid 
generalizations and should reflect exceptional cases.  As such, the sectors in WT/CTE/W/67 might be 
broken down into subsectors and analysed from di fferent points of view to capture the range of 
environmental effects of trade liberalization.  It would be worthwhile to examine whether new sectors 
could be included in the assessment.  
127. The representative of Norway  said WT/CTE/W/67 could give importan t inputs to possible 
future negotiations on market access.  He recommended that the document be further revised in light 
of delegations' comments.  He said that it was imperative that other WTO Bodies in addition to the WT/CTE/M/17  
Page 34 
 
 
CTE take environmental aspects into consideration, where appropriate.  This should be the case  with 
regard to ongoing work in various WTO Bodies and in future WTO negotiations.  The introductory 
section of the document contained general statements on the relationship between trade liberaliz ation 
and environmental benefits.  The document's purpose was not clearly stated in the document itself.  
Norway's general aim was to make environment and trade policies mutually supportive.  One way to 
do that would be to identify so -called "win -win" situ ations where trade liberalization might yield a 
double dividend of environmental and economic gains.  In undertaking this complex analytical 
process, a number of sectors and situations would have to be examined.  Some sectors would be 
classified "win -win",  whilst others might be found to be "win -lose", where removing certain trade 
restrictions or distortions would lead to net negative environmental effects.  Both categories should be 
reflected in the document.  The document should pay equal attention to bot h negative and positive 
environmental effects flowing from further trade liberalization examined in the sectoral analysis in 
order to identify net environmental benefits.  This was necessary in order to ensure an objective 
analysis.  Norway thus preferred the title of the document to read "net environmental benefits".  
Norway would insist that the subtitles and the text, especially the introduction, be changed to reflect 
both positive and negative environmental effects.  
128. Norway stated that the introduct ion indicated in several places that trade liberalization 
automatically led to environmental benefits (paragraphs 2 and 6).  However, it was likely that both 
"win -win" and "win -lose" situations would occur depending on the area and circumstances.  The 
results of the analysis of the various sectors/situations would provide the answer to whether there was 
a potential for a "win -win" situation or not.  It was unclear whether paragraphs 9 to 11 were 
conclusions based on the sectoral analysis or indicators accor ding to which the analysis had been 
undertaken.  It would be wise to distinguish more clearly between the introduction and conclusions 
based on the sectoral analysis.  While the introduction aimed at preparing the ground for the sectoral 
discussions, the c onclusions (sectorwise to the extent that they varied substantially between sectors) 
should objectively summarize the most important sectoral findings.  The environmental benefits 
presented in paragraph 10 might need some further clarification.  It was not  evident how and to what 
extent "improvements in the institutional, regulatory, monitoring or enforcement capacities of 
environmental agencies" were linked to trade policy reforms.  The rest of paragraph 10 did not clarify 
the first sentence of the paragra ph;  and the content of this paragraph was not reflected in the 
concluding paragraph 12.  More attention could be paid to the environmental impacts of 
transportation.  As a substantial proportion of SOx, N0x, and CO2 emissions were linked to transport, 
the document should try to give a rough indication of the extent to which trade liberalization would 
contribute to these emissions.  Due to sectoral variations, this issue could, where appropriate, be 
examined sector by sector, but it should also be referred to in the introduction (in a separate 
paragraph) and possibly in the conclusions.  
129. The representative of the European Communities  noted the efforts in WT/CTE/W/67 to take 
account of Members' views.  This document was an informative contribution to CTE work although 
the EC, like others, did not agree with every point, nor all the conclusions made.  Overall the 
document represented a well -balanced overview of the environmental benefits of removing trade 
restrictions and distortions and provided a useful s ource of reference.  The EC welcomed the wider 
availability of this document arising from its derestriction.  Citing the 1996 Report of the CTE, 
WT/CTE/W/67 noted that trade liberalization in general could be of environmental and 
developmental benefit by f acilitating a more efficient allocation and use of resources.  Although the 
document identified the adverse consequences of some aspects of trade liberalization and noted that 
flanking measures may sometimes be necessary, it concentrated, based on the mand ate of the CTE, on 
the environmental benefits of removing trade restrictions.  An important qualification was that 
although trade liberalization had a key contribution to make to sustainable development, it was a 
precondition.  Rather, sustainable developm ent must be based first and foremost on sustainable 
management practices;  appropriate environmental policies were needed above all at the national 
level, if the full benefits of trade liberalization were to be realized in the domestic, regional and global  
environments.   WT/CT E/M/17  
 Page 35 
 
 
130. The EC supported the direction of the introduction and the point that the removal of trade 
restrictions was rarely synonymous with unambiguous improvements in environmental quality per se ;  
there may be positive effects but these were n ot automatic.  The relationship was complex as was the 
measurement of any environmental benefit which may result from liberalization.  The EC agreed with 
the general remark that the removal of trade restrictions and distortions improved the overall 
functio ning of markets, particularly a more open and liberal trading system increased the opportunity 
to disseminate environmentally sound products, services and technologies.  The EC also agreed with 
the statement that adverse production and consumption external ities must be integrated into the 
decision -making process for the benefits described to become reality.  These externalities must also be 
reflected in the price of goods and services.  In response to ASEAN's question, he said there was an 
initiative in the  Dutch Parliament on the labelling of timber;  before the procedures of the Dutch 
Parliament were completed, this proposal would be submitted to the Commission for its compatibility 
to be checked with EC legislation, including international obligations.  
131. The representative of Japan  said a more comprehensive analysis was necessary to take into 
account the positive and negative environmental effects of trade liberalization.  Other elements should 
also be reflected such as multifunctions and externalities associated with for example agricultural 
activities, including biodiversity, landscape and flood and soil prevention.  Such an approach was vital 
to achieve the best relationship between market access and the environment.  The level and nature of 
trade mea sures on the environment would vary depending on natural conditions, such as climate, soil, 
production methods as well as other economic and social conditions in each country or area.  As 
Switzerland had noted, the removal of trade restrictions and distort ions would not automatically result 
in environmental benefits.  Although the title of WT/CTE/W/67 was "environmental benefits of 
removing trade restrictions and distortions", considering only the benefits while neglecting the 
negative aspects would not res ult in "win -win" situations.  Japan supported Norway's suggestion to 
review the document.  
132. The representative of Argentina  said that he agreed with those that considered that 
liberalization of trade did not guarantee greater environmental protection, p articularly if the price of 
traded goods did not reflect the full cost of production.  To promote a cooperative relationship 
between environmental protection policies and the multilateral trading system, before introducing 
further trade restrictions, those  that prevented the true production costs from being reflected in the 
actual price of traded goods had to be eliminated.  Prices determined decisions made by investors, 
producers and consumers;  price distortions altered the message sent to economic player s, which had a 
clear environmental impact, particularly on commodity prices.  There were three reasons for this:  (a) 
commodities formed the basis of the production process, so any change in their prices had a knock -on 
effect on the remainder of the proces s;  (b) commodities had a cost structure that was much simpler 
than that of goods produced by a greater level of manufacturing, which meant that an incorrect 
valuation of the natural resource being exploited (land, fishing stocks, forests, air, or water) w ould 
have a much more appreciable effect than on products with a more complex cost structure;  and (c) 
commodities were basically fungible, so that any price distortions would easily be transmitted to the 
international pricing system.  
133. Therefore, in Ar gentina's view, any change in prices might distort the message which was 
sent.  The relative scarcity of any single factor involved in production (e.g. natural resources, such as 
land or water) was obscured and this stood in the way of determining the syst em's capacity to sustain 
a given production over a period of time (known as sustainable production).  Accordingly, it should 
be asked which of the present trade restrictions and distortions might alter prices and thus have to be 
removed to benefit the envi ronment.  As was recognized in Principle 16 of the Rio Declaration, to be 
in a position to implement a policy of sustainable production, the prices of goods had to reflect both 
the private costs of production and the environmental externalities caused duri ng their production, 
distribution, consumption and disposal.  Policies implemented by some OECD countries that 
subsidized production and exports artificially depressed international prices, to the extent that they did 
not even reflect the private cost of p roduction, and prevented any possibility of implementing WT/CTE/M/17  
Page 36 
 
 
environmental policies conducive to incorporating environmental externalities.  In short, subsidy 
policies that affected commodity's output could give rise to two types of negative environmental 
effects:  (a) local effects, through the spread of overexploitation practices;  and (b) global effects, 
forcing those producers, who were not beneficiaries to these government support practices, to accept 
distorted international prices, which left them facing a harsh choice:  either to overexploit their own 
resources in order to increase their immediate output, or to abandon the market.  
134. The representative of Australia  welcomed the derestriction of WT/CTE/W/67, which had 
added greatly to the understanding o f the issues at the NGO Symposium.  The document usefully 
collated a large amount of existing information on trade -related economic policies and trends, 
environmental policies and conditions and analysed the linkages.  Its conclusions about the clarity of 
these linkages varied, as they should according to the sector and associated complexities.  But the 
document pointed to a variety of natural resource based sectors where there was a considerable weight 
of expert opinion pointing to the potential that refor m of economic and environmental policies had, at 
both the domestic and international level, to provide overall developmental and ecological benefits.  
The debate on this Item in the CTE had raised a number of factors which were important when 
considering h ow to maximize the level of certainty about the environmental results of trade reform, 
such as care and efficiency in policy design, improving the monitoring and assessment of 
environmental factors, and the overall need for environment and related policies  to internalize 
environmental costs.  Building the capacity of national governments to deal with this would be vital.  
Although this had been generally agreed, it should not be forgotten that significant efforts were 
already underway internationally and do mestically due to the recognition of the absolute importance 
of policies in these areas for environmental management overall.  
135. Australia had focused particularly on agriculture and fisheries, both of which had been the 
subject of considerable empirical  analysis that confirmed the potential for significant environmental 
and economic benefits to flow from reform.  As such, there was sense in arguing for a continuing 
focus on them and other natural resource based sectors where the market distortions were g reatest and 
where the identification by the CTE of particular trade policy reforms had the greatest potential to 
deliver a double dividend.  Australia reassured some delegations that they did not want to jeopardize 
the positive social and environmental ben efits facilitated by agriculture.  However, these benefits had 
to be reached in the most efficient, targeted and transparent way possible, without the massive 
economic and environmental distortions that were currently being experienced.  This issue of poli cy 
efficiency, referred to by the US, was a key aspect to consider.  WT/CTE/W/67 had been unfairly 
criticized on a number of occasions.  The words "automatic" and "automaticity" had been used in 
connection with its analysis of the relationship between trad e reform and environmental benefit, 
particularly concerning agriculture.  This criticism was unfair.  WT/CTE/W/67 provided a clear and 
relevant analysis of the complexities in this area, and the importance of the interaction between 
economic, trade and bro ader environment policies.  It had also been useful in inspiring a sector -by-
sector approach to Item 6, which had been useful in facilitating a productive and focused discussion.  
136. The representative of Pakistan  said the CTE should identify "win -win" si tuations.  At the 
general level, there was a "win -win" situation which was created by the positive relationship between 
trade liberalization and increasing per capita incomes.  This linear relationship may not hold in all 
cases unless supplemented by other  measures, including environmental measures and positive 
measures, including technology and financial transfer.  The general validity of this relationship was 
undeniable.  Deeper consideration should be given to identifying specific "win -win" situations, s uch 
as those set out by Members and to determining to what extent general principles could be derived 
from these situations for overall discussions on trade and environment.  This would avoid a reiteration 
of positions.  
137. The representative of New Zeala nd said the sectoral discussion emanating from 
WT/CTE/W/67 had been useful.  He shared Australia's comments on some of the unfair criticisms of 
the document.  New Zealand's approach was to look for complementarities between trade  WT/CT E/M/17  
 Page 37 
 
 
liberalization and environ mental benefits;  the discussion illustrated that there were many.  Some of 
the statements of concern about the purported adverse environmental consequences of trade 
liberalization, for example in the agricultural sector, seemed to convey the impression th at at the time 
a number of the key trade distorting policies were put in place, for example export subsidies, the 
objective had been to achieve environmental benefit.  He challenged this suggestion.  The concerns 
expressed about trade liberalization in som e areas did not seem to be concerns about adverse 
environmental effects as such, but more simply,  concerns about the notion of reform or change.  The 
WTO should not be reluctant to look at reform and to consider change, particularly given the 
complementar ities identified between reform and environmental benefits.  Brazil, Canada and 
Pakistan had pointed to continuing to work in a practical manner in this area on the basis of national 
experiences which were brought to the attention of the CTE, to study indi vidual sectors in order to see 
the close nexus which existed between trade liberalization and environmental benefits. Whilst he felt 
WT/CTE/W/67 had stimulated a useful discussion, this was only the beginning and it was up to 
delegations to continue to con tribute their national experiences.  New Zealand would be contributing 
to this process in several sectors, such as fisheries and agriculture.  
138. The representative of Canada  said the sectoral and general discussions under Item 6 had been 
better than in p revious discussions, which reflected its more focused structure based on 
WT/CTE/W/67.  In general terms, the document had been unfairly criticized.  The CTE should keep 
in mind that WT/CTE/W/67 was a working document intended to stimulate discussions.  Can ada 
would prefer more presentations or contributions on concrete national experiences to refine the 
analysis in the document, rather than revising it.  Delegations had to rise to the challenge of 
contributing their national experiences.  Canada hoped that whenever Item 6 was addressed, the 
discussion could be structured in the same manner.  The sectoral approach was a tool to allow 
Members to deepen their understanding of the issues.  As was illustrated in the NGO Symposium, 
there was an advantage to an imp roved understanding amongst civil society that the market access 
cluster may provide more immediate environmental and developmental benefits than the other cluster, 
although both clusters were equally important.  
139. The representative of the United States  said that the discussion should be balanced;  the CTE 
should not engage in oversimplistic analysis of the issues.  Although there was a need for 
complementarity between trade and environmental policies, this should not be used as a reason not to 
liberaliz e trade.  To the extent areas were identified in which it was particularly important to have 
complementary policies, it would be important to help governments in identifying these policies, as 
opposed to finding reasons not to liberalize.  He supported New  Zealand's comment that Members 
should resist any impulse towards green cloaked protectionism, or to find new reasons for old trade 
barriers.  It was important to examine the unique contribution which the WTO could make in the area 
of trade and the environ ment.  The WTO's vocation had been to try and improve market efficiency;  
this was complementary to efforts in the environmental field to try to get to the right price.  This was 
the emphasis that many Members had on subsidies, particularly those subsidies  which interfered with 
market signals.  Given that the WTO was a Member led organization, the time had come for Members 
to take the analysis further;  it was not the task of the Secretariat to solve disagreements which 
Members could not solve amongst thems elves.  It was particularly useful that a number of countries 
had contributed their national experiences to take this process forward, such as Canada, Brazil and 
Colombia.  
140. The representative of Mexico  said it was necessary to look at the approach of t he discussions 
under Item 6 and the function of Secretariat documentation.  It was necessary to identify "win -win" 
situations where trade liberalization could be environmentally beneficial;  this was the mandate of the 
CTE.  This would be the positive cont ribution which the CTE could make on this Item.  
WT/CTE/W/67 served to provide a basis for the discussions.  Mexico did not wish this document to 
be revised as it was not a negotiated document.  She suggested that in the next discussion of Item 6, 
Secretar iat documentation and national contributions could be included on the first part of Item 6, the 
effect of environmental measures on market access, in particular in relation to developing countries.  WT/CTE/M/17  
Page 38 
 
 
141. The representative of Korea  said that as it was clear  that a consensus did not exist on the 
environmental effects of the agricultural trade liberalization, it would not be possible to make a hasty 
generalizations.  Korea did not wish to repeat its position on this issue.  It could not be ignored that 
there w ere positive and negative effects of trade liberalization.  Without regard to country specific 
situations and special developmental and social needs, analysis which was solely based on an 
economic perspective could not lead to a reasonable conclusion.  
142. The representative of Malaysia, on behalf of ASEAN , supported the call for continued 
discussions based on national experiences with a view to identifying "win -win" situations;  this could 
move forward the discussions.  Concerning Canada's statement, ASEAN  reiterated that all items on 
the work programme should be given equal emphasis, as mandated by Ministers.  
Item 2   The relationship between environmental policies relevant to trade and environmental 
measures with significant trade effects and the provision s of the multilateral trading 
system  
143. The representative of the European Communities  informed the CTE that the EC had recently 
commissioned a study on environmental reviews of trade measures and agreements, to be finalized in 
1998.  Its objective was t o develop a methodology of options to implement the OECD guidelines on 
environmental reviews of trade measures and agreements in the EC.  As part of this study, a survey of 
experiences in other countries and at the international level would be conducted;  consultants who 
were conducting the study would contact the WTO Secretariat and some WTO Members to collect 
information and the EC would be grateful if Members would extend their assistance to them.  The EC 
would keep Members informed on progress on this i nitiative.  
144. The representative of the United States  said the discussion on market access issues had 
highlighted the role that environmental reviews could play to ensure complementarity between trade 
and environmental policies.  The US welcomed the EC's  statement and hoped that, when its review 
process had been completed, the EC would consider presenting its experience.  The US had been 
encouraged by the response to its presentation on US environmental reviews, and hoped others who 
had performed similar reviews would share them in the CTE.  
Item 3(b ) The relationship between the provisions of the multilateral trading system and 
requirements for environmental purposes relating to products, including standards 
and technical regulations, packaging, labelling and recycling  
145. The representative of Colombia  presented his delegation's paper on the Colombian flower 
sector and eco -labelling and its impact on market access (WT/CTE/W/76 -G/TBT/W/60).  Colombia is 
the second largest exporter of flowers after the Neth erlands, with a world market share of 
approximately 10 per cent.  In preparing this study, it was noted that there was a great interest in the 
Colombian private sector to develop instruments to efficiently link environment and trade provisions.  
The guidel ines to develop these tools had been based on the principles of transparency, equivalence 
and mutual recognition.  Concern for the management, conservation and sustainable use of water 
resources used in production schemes in the flower sector had led to a sustainable management 
initiative, the FLORVERDE programme, which covers the continuous and gradual improvement of 
production at the sectoral level. Through a registration system, the objective was to identify 
20 per cent of the companies with the best env ironmental performance.  The performance of these 
companies would be used as the goal to achieve for the remaining companies over the next three 
years.  Every three years there would be an evaluation of the system to set new performance levels.  
Likewise, case studies had been carried out on how eco -efficiency could be achieved.  Another focus 
of the programme was to enhance environmental management systems in floral companies, as the 
type of ISO 14001, to enhance market access and improve productivity.  Wh en a management system 
was adopted which rationalized resource use, such as lower use of energy and water and increased  WT/CT E/M/17  
 Page 39 
 
 
floral production, the environment was protected whilst production costs were reduced and 
productivity increased.  This was a clear exam ple of a "win -win" situation.  
146. Despite these efforts towards environmental protection, Colombia's flower sector had 
encountered difficulties with market access in certain countries due to the fact that private 
organizations had promoted a campaign to d enigrate Colombian flowers based on isolated and 
unjustified cases.  In turn, these organizations offered the implementation of eco -labelling schemes on 
unacceptable conditions for Colombian exporters;  the proposed eco -labels were discriminatory as 
they w ere only aimed at certain countries, and their costs were high with the revenue collected 
devoted to the functioning of the label in the importing country.  This was a coercive measure and the 
Colombian private sector had refused to subscribe to these eco -labels which had resulted in the 
increase of campaigns against Colombian flowers.  The checklist proposed under the eco -labelling 
programme used unclear language and was arbitrary and was monitored by foreign experts.  Thus, the 
proliferation of eco -labels  made it impossible to comply with the requirements of the different 
checklists required by each country's organization.  
147. Given this experience, Colombia felt it was important for the CTE to develop a clear position 
on this issue so as to avoid the pro liferation of private eco -labels without common standards or 
monitoring to ensure that they did not create trade and market distortions or confuse consumers.  It is 
essential to guarantee transparency in the processing and application of eco -labels and to ensure their 
non-discriminatory character and that interested parties had the opportunity to participate in their 
development.  In this respect, eco -labelling programmes should be subject to the provisions of the 
TBT Code  of Good Practice.  The WTO should study and develop mutual recognition and 
equivalence with respect to eco -labelling;  their application could solve some of the problems raised 
in Colombia's paper.  Eco -labels could have significant market access impacts as highlighted by 
Colombia's experi ence in the flower sector and Canada's experience in the forestry sector.  
148. The representative of Egypt  said, as set out in WT/CTE/W/79, eco -labelling studies illustrated 
the increasing evidence that developing countries were severely affected by enviro nmental 
requirements, including eco -labelling.  In some cases, these requirements represented 5 to 20 per cent 
of additional costs on exported products, which placed a burden on developing country exporters, 
particularly SMEs.  An ITC workshop on eco -label ling and other environmental quality requirements 
related to textile and clothing exports from developing countries had concluded that some of the 
problems faced by developing countries resulted from the multiplicity of eco -labelling schemes in 
developed c ountries and their differing criteria.  Some schemes were found to lack credibility, and the 
manner in which they set standards was rushed.  Eco -labels were more a commercial and marketing 
tool than an environmental one.  Egypt set out some recommendations  to find a solution to this 
problem:  (a) allow developing countries to participate in the setting of criteria and standards so as to 
ensure that their interests are taken into account;  (b) provide developing countries with the necessary 
technical assista nce to improve their environmental performance;  and (c) increase harmonization and 
mutual recognition of eco -labelling schemes, while ensuring that one country's standards were not 
imposed on another for recognition to be accorded.  Egypt felt WT/CTE/W/79  could have included 
conclusions and recommendations by the WTO in this area to move CTE work forward.  The title of 
WT/CTE/W/79 could be amended to include reference to market access effects, particularly in 
developing countries, and include ways in which  developing countries could address eco -labelling 
concerns.  
149. The representative of Ecuador  shared many of the conclusions in Colombia's paper.  He 
highlighted certain eco -labelling initiatives which had also had an impact of Ecuador's exports.  The 
flower sector was one of the most dynamic in Ecuador's economy and was the export sector which 
had grown most in recent years.  Increased flower exports were a result of efficiency in this sector and 
its capacity to adapt to market access conditions in import ing countries.  The Ecuadorian flower sector 
had adapted to increasing costs and different local conditions relating to eco -labelling in importing 
countries.  Ecuadorian exports had to overcome new trade barriers similar to those set out in WT/CTE/M/17  
Page 40 
 
 
Colombia's pape r.  Ecuador shared Colombia's concern on the lack of monitoring of international 
standards.  Ecuador was concerned with the proliferation of private eco -labels which escaped the 
control of national institutions and went against WTO objectives.  He supporte d Colombia's 
recommendation to examine the link between CTE work on eco -labelling and the TBT's 
Code  of Good Practice.  He encouraged presentations such as Colombia's based on national 
experiences.  
150. The representative of Brazil  said Colombia's national  contribution was an example of the 
impact of the proliferation of eco -labels on trade in Colombia's flower sector.  Brazil supported the 
need to implement paragraph 185 of the CTE 1996 Report to ensure that national eco -labelling 
programmes were non -discr iminatory and based on consensus.  Brazil thanked Canada for its high 
tech presentation and paper, perhaps the first of its kind in the WTO, on the forestry sector, which 
represented a substantial contribution to the discussions.  In a similar manner, Braz il would like to 
contribute its national experience with eco -labelling programmes in the leather and forestry sectors.  
The Brazilian Association on Technical Standards (ABNT) was the standardization body responsible 
for the development of the Brazilian Ec o-labelling Programme.  Besides being a founding member of 
ISO and the International Electrical Committee (IEC), ABNT also participated in regional 
arrangements such as the Pan American Cooperation on Technical Standards (COPANT) and the 
Mercosur Committee  for Standardization.  Since 1995, the ABNT Technical Committee on 
Environmental Certification had been working on the development of criteria for leather and footwear 
products.  Representatives from industry, Government, research institutes and NGOs parti cipated in 
the Technical Committee.  Whenever there was a consensus in the Committee on certification criteria, 
these criteria were submitted to public consultation according to the guidelines of ISO 14024 
("Environmental Declarations and Labels – Environm ental Labelling Type  I – Principles and 
Procedures");  ISO/IEC Guide 59 (Code  of Good Practice on Standardization);  and the WTO 
Code  of Good Practice on the Elaboration, Adoption and Application of Standards.  The public 
consultation process ensured that parties interested in the environmental labelling program on leather 
and footwear had the opportunity to provide input on the proposed criteria.  Participation also ensured 
that the Committee took into account the appropriateness of every comment to be inc orporated to the 
document.  The credibility of this process was maintained by the fact that all interested parties 
participated.  
151. The forestry sector, supported by technological research institutions, had begun to develop a 
labelling program, CERFLOR, to verify and certify the origin of Brazilian forest -based raw materials.  
To structure CERFLOR according to international labelling standards, a Technical Committee on 
Forestry Labelling had been created in 1997.  NGOs, Governments, research institutions and the 
business sector participated in this Committee.  This programme was based on the guidelines of 
ISO/FDIS 1402 (Environmental Labels and Declarations - General Principles).  The Technical 
Committee's work also followed the ISO/TC 207/WG2 Technical Re port on Forestry.  CERFLOR 
was a complement to possible environmental management system certification based on ISO 14001, 
which already took into account aspects of environmental performance.  CERFLOR was based on five 
principles that applied to natural an d planted forests:  (a) biological diversity conservation;  (b) 
sustainability of renewable forestry resources and the rationality of its use in the short, medium and 
long term;  (c) water, soil and air protection;  (d) environmental, economic and social d evelopment of 
the regional area where the forestry activities take place;  and (e) law enforcement.  These principles 
took into account different forest types at the regional and local levels.  It should be noted that 
CERFLOR and the leather and footwear l abelling were voluntary programs that aimed to encourage 
Brazilian consumer awareness, and ensure that Brazilian forestry and leather and footwear products 
were competitive in the international market.  
152. The representative of the European Communities  said that the Items in the market access 
cluster should not be addressed from a narrow market access perspective.  It was not appropriate to 
consider the market access impact of eco -labelling schemes without considering the role these 
schemes can play to pro mote sustainable consumption and production.  This role was recognized in  WT/CT E/M/17  
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Agenda 21  and the CTE 1996 Report.  He thanked Canada, Colombia and Brazil for their 
contributions.  It was important to take into account that eco -labelling was only one among many 
instruments of environmental policy.  As the EC had indicated in its non -paper on eco -labelling (23 
July 1996), it would be difficult to imagine a less trade restrictive alternative.  Eco -labelling schemes 
were voluntary and relied on the market mechanism of consumer choice.  Discouraging the use of 
eco-labelling schemes might provide an incentive to use other instruments with more of an impact on 
market access.  Nevertheless, the EC recognized the need to ensure increased transparency in the 
management and  operation of these schemes to ensure they were not operated in a discriminatory 
manner.  He noted that the CTE had not effectively addressed the effects of non -governmental 
schemes such as those presented in Colombia's paper.  He informed the CTE that the  EC had 
undertaken new initiatives to make its eco -labelling scheme more transparent.  Information on the EC 
eco-labelling scheme was available on the EC website.  
153. The representative of India  said WT/CTE/W/79 illustrated that the concern about the 
restrictive effect of eco -labelling requirements on market access of developing countries could be 
substantiated by studies in relevant intergovernmental organizations.  The broad issues which arose 
for the  consideration of the CTE were:  (a) the way eco -labelling criteria took into account the 
conditions of individual developing countries - referred to in the studies by ESCAP in paragraph 4, 
ITC in paragraph 8, UNCTAD in paragraph 22, OECD in paragraph 31 of WT/CTE/W/79;  (b) the 
adverse impact on SMEs in dev eloping countries, especially the impact of eco -labels on their market 
access opportunities - referred to in the studies by ESCAP in paragraphs 10 and 12, and UNCTAD in 
paragraph 26;  (c)  the increased costs for developing country exporters in complying wi th eco -labels - 
referred to in the studies by ESCAP in paragraph 12, and ITC in paragraph 20;  and (d) the need for 
greater transparency, and for more effective and representative participation of developing country 
exporters, especially SMEs - referred to  in the studies by ITC in paragraph 18, UNCTAD in 
paragraph 22, UNIDO in paragraph 29, and OECD in paragraph 31.  The CTE should provide 
Members with an opportunity to discuss these issues.  Referring to Colombia's experience and 
concerns on the market acc ess restrictions caused by private eco -labelling schemes, he said that this 
illustrated the protectionist impact of eco -labels on developing country exports.  Ostensibly put in 
place to achieve environmental  objectives, such eco -labelling schemes were in fact a means to restrict 
trade.  
154. The representative of Pakistan  said his delegation's reservations on environmental standards 
flowed from concerns about the motivation behind these standards and the extent they motivated 
consumer behaviour to purchase environmentally friendly products.  Evidence in this regard was 
mixed.  The OECD study contained the most optimistic assessment, which said that eco -labelling had 
only been moderately successful with several caveats.  The other concern was whether these sc hemes 
had significant market impacts.  Depending on the study, the evidence was also mixed.  ESCAP 
illustrated that particularly in the Asian region there had been significant market effects.  Pakistan was 
not sure how beneficial eco -labelling was to achie ve environmental objectives.  The body of evidence 
indicated that these schemes had negative market access impacts due to a proliferation of individual 
schemes, as illustrated in Colombia's paper, which imposed costs on developing country exporters, 
partic ularly SME.  SMEs did not have the technical expertise to adhere to such schemes.  One of the 
main concerns was that these schemes necessitated the adherence to inappropriate criteria, mainly as a 
result of the fact that all interested countries could not participate in their formulation.  
Implementation of these schemes without representation in their development led to various problems.  
If there were effective participation of developing countries, sufficient technology transfer, and credit 
lines for dev eloping country producers, developing countries might be able to consider adhering to 
these schemes.  
155. The representative of Korea  thanked Colombia for contributing a case study on its flower 
sector.  Colombia's paper illustrated a "win -win" situation w hich could achieve both improved 
environmental protection and increased productivity;  it also highlighted some difficulties inherent in 
private eco -labelling scheme, and their potentially negative market access implications.  The results of WT/CTE/M/17  
Page 42 
 
 
recent studies  on the trade effects of eco -labelling by international organization set out in 
WT/CTE/W/79 reinforced Korea's apprehension that the market effects were real and negative.  
Although most eco -labelling schemes were voluntary, they might cause discriminatory  trade effects as 
illustrated by studies carried out by ESCAP and UNCTAD.  According to the ESCAP study, large 
companies had reported adjustment costs of 8 to 10  per cent, while SMEs had reported costs of 15 to 
20 per cent.  The effect of eco -labelling on competitiveness and its role as a possible trade barrier and 
discriminatory tool against foreign products was clear.  The key means to minimize the negative trade 
effects of eco -labelling were transparency, equivalency and mutual recognition.  To ensure th e 
transparency of developing and managing eco -labelling schemes, participation of all stakeholders in 
the consultations and decision -making process should be guaranteed.  However, it could be extremely 
difficult for developing country exporters, which ofte n lack information and capital, to participate in 
these processes on an equal footing.  The existence of multiple schemes and constantly changing 
criteria compounded the problem.  More flexible application of equivalence and mutual recognition 
was of impor tance to developing country exporters, particularly SMEs.  During the NGO Symposium 
in 1996, many participants had complained about the ISO process and expressed doubt about the 
transparency of its consultations and decision -making and representation of al l stakeholders;  many 
developing country enterprises, especially SMEs, had not been involved in the ISO process.  
Although, WT/CTE/W/79 had not provided recommendations as to how these trade effects could be 
overcome, practical ways to address these proble ms should be explored.  
156. The representative of Hong Kong, China  thanked Colombia for its presentation.  Hong Kong, 
China was examining its national experience with eco -labelling schemes.  A common theme 
underlining studies in the area of eco -labelling a nd packaging was the need to ensure transparency.  
He was interested to learn more about the principle of extended producer responsibility, described in 
WT/CTE/W/75 as an emerging strategy used in OECD countries to promote the integration of 
environmental factors associated with product life cycle.  This principle had already been applied in 
eco-packaging through different instruments, such as deposit refund schemes and product charges.  
Information to date, however, was limited as to the probable impact on  market access and trade and 
competition.  An OECD workshop in Helsinki in May was expected to shed light on these issue;  the 
Secretariat could convey the outcome of this workshop.  If there were significant market access 
impacts, then stock could be take n of whether these measures had been included in the WTO 
notification system and the environmental database (EDB).  
157. The representative of Hong Kong, China agreed that eco -labelling schemes could distinguish 
between products by according preference to c ertain brands within the same product category by 
virtue of their relative environmental impact.  This would not appear to be discriminatory as long as 
the same criteria were applied evenly to like products irrespective of the product's source.  Schemes 
incorporating production -related criteria should be the subject of particular concern as they could 
discriminate against imports if they reflected exclusively the environmental preferences of the 
importing country.  The process of selecting and adopting crit eria, if not based on scientific and 
objective criteria, could be used as a protectionist tool.  The use of production -related criteria in this 
respect was particularly problematic.  However, all eco -labelling schemes, including schemes based 
on product at tributes alone, in order to be effective had to have a tangible effect on the marketability 
of the product concerned and certain traders were bound to be disadvantaged.  Transparency and 
participation in the adoption of criteria and equivalence of mutual r ecognition were important to 
mitigate any adverse trade effects.  However, there was no assurance that this would provide a 
complete solution.  The OECD study had not found any evidence to date of changes in trade flows 
from the use of eco -labelling in OEC D countries.  The UNIDO study noted that several SMEs were 
not aware of any adverse market access effects of eco -labelling.  It was only reasonable to expect that 
environmental awareness would continue to increase, at which point these effects may become m ore 
obvious.  He noted that there was a risk that if eco -labels were used as a protectionist tool, different 
countries might use these schemes on a reciprocal basis.  He supported further work in this area, 
including on alternatives to eco -labelling, and t echnology transfer.    WT/CT E/M/17  
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158. The representative of Malaysia, on behalf of ASEAN , thanked Colombia for its contribution.  
ASEAN said that the absence of an agreed international definition of what constituted sustainable 
forest management could result in eco -labelling programmes being used as a trade discriminatory 
tool.  WT/CTE/W/79 illustrated this concern and elucidated the negative effects on developing 
countries in several sectors by drawing on conclusions of various studies.  This clearly showed that 
eco-labelling was prone to be used as a commercial tool rather than an environmental tool, a point 
illustrated in Colombia's paper.  Despite the Colombia's efforts to implement eco -efficient 
programmes, it was evident that these efforts had not met the objecti ve for which they were in the first 
instance implemented.  This showed that problems with the unilateral introduction and application of 
eco-labelling, including those implemented by private bodies, was unresolved;  eco -labelling 
requirements had denied Co lombia market access opportunities.  This should be further discussed.  He 
thanked the EC for clarifying the proposed eco -labelling initiative in the forestry sector and asked that 
ASEAN be kept abreast of developments in this area, either in the CTE or in  any other relevant WTO 
forum.  
159. The representative of Canada  said the discussion had illustrated that eco -labelling was a real 
issue for many Members, particularly those Members who exported commodities.  This was not a 
developed country/developing cou ntry issue.  Canada had concerns on eco -labelling and a major 
sector of its economy had been affected.  He highlighted paragraph 15 of WT/CTE/W/79, which 
noted that a number of eco -labelling programmes had been established in ESCAP countries.  It would 
be interesting if those countries could share their experiences either with respect to programmes 
designed for the domestic market or those designed for export markets.  As had been set out in its 
presentation on forests, Canada had developed some programmes such as the FPDS which had more 
of an export market orientation, but which could also be applied in the domestic context and come 
with a more domestic orientation such as environmental choice.  Paragraph 34 illustrated how eco -
labelling may be evolving fro m a retail to a distribution channel tool.  As set out in Canada's national 
experience paper with its eco -labelling programme, this may result in these programmes having an 
increased market impact.  The experiences outlined in Canada and Colombia's papers suggested that 
the distribution channel link and the effect that groups can influence distribution channel purchasing 
patterns that is increasingly important.  This was an area which should be examined.  On 
WT/CTE/W/79, he said it was up to delegations to determine conclusions based on the various 
approaches and experiences with these issues.  
160. The representative of Canada thanked Colombia for its contribution on the flower sector.  
Concerning the EC's comment on the need for a balanced discussion, it wa s clear in terms of the 
national experiences presented by Canada, Colombia and Brazil, that the issue was not environmental 
improvement.  Domestic programmes were designed to do this.  There was balance in the discussion 
as all the examples which were ment ioned referred to how Members had tried to develop national 
approaches to improve sustainable production practices;  the FLORVERDE programme was a 
concrete example of how Colombia was trying to improve the economic and environmental 
production.  The issue was how to deal with eco -labelling programmes and their potential to 
discriminate between equally valid approaches to improving environmental performance.  In this 
context, Colombia's conclusions went along the same lines as those Canada was considering.  He said 
Members should focus on the policy considerations in paragraphs 43 -54, rather than footnote 1 as the 
time was not yet right to discuss footnote 1.  He thanked Colombia for derestricting its paper and 
issuing it as a joint TBT paper;  the paper was useful to have in the public domain given that it dealt 
with private programmes.  It was important to send a policy signal that this issue had become one of 
interest in the CTE.  
161. Concerning India's questions on how to deal with innovation within a thre e year time frame in 
Type  I eco -labelling programmes, the representative of Canada said that the main criticism of industry 
was that these programmes were not flexible or rapid enough in comparison to Type  III programmes.  
If the company currently did not meet the criteria, technological innovation within a three -year period 
would allow the company to get the label.  In terms of how comments were taken into account, he WT/CTE/M/17  
Page 44 
 
 
said that at the end of the review process there was an opportunity to have an explanatio n on the 
reasons if and how comments had been taken into account.  Following paragraph 185 of the 1996 
Report of the CTE, he thanked New Zealand (G/TBT/CS/N/86) and Japan (G/TBT/CS/N/73) for 
having their eco -labelling programme accept the TBT Code of Good Practice.  
162. The representative of the United States  said eco -labelling was a valuable tool to achieve 
environmental goals and to provide consumer information.  It would be untenable for the WTO to go 
against providing consumer information.  Although the  US had experience with the implementation of 
particular programmes which had raised concerns, this did not detract from the value of eco -labelling 
in environmental policymaking.  Based on the US experience, there was no reason to assume that 
private secto r labelling schemes were likely to raise more issues than government sponsored 
programmes.  
Item 4   The provisions of the multilateral trading system with respect to the transparency of 
trade measures used for environmental purposes and environmental measur es and 
requirements which have significant trade effects  
163. The representative of Hong Kong, China  said WT/CTE/W/77 provided a useful overview of 
environment -related notifications in 1997.  The considerable number of relevant notifications and the 
wide r ange of WTO notification obligations involved demonstrated the importance of the EDB as a 
reference.  The search methodology used in compiling WT/CTE/W/77 was sensible in view of 
resource constraints.  Members should contribute to this exercise by providin g the Secretariat with 
information on whether specific notifications should be included or excluded, as well as comments on 
the choice of search words.  He supported the proposal in paragraph 7(b) of WT/CTE/W/78 that 
reviews should be conducted before the annual Comprehensive Review.  The electronic delivery of 
the EDB should enable the widest possible use of the database.  Appending the EDB to the DDF was 
a practical option in terms of accessibility and convenience.  He asked what the cost implications wer e 
of a hyperlink.  The EDB would be even more useful if the frequency of updating could be increased.  
164. The representative of the European Communities  said the proposals in WT/CTE/W/78 were 
consistent with the recommendation in the 1996 Report of the CT E.  The EDB should be updated 
annually, such as had been undertaken for 1997 in WT/CTE/W/77.  
165. The representative of Japan  supported the proposals in WT/CTE/W/78 and said that, since all 
SPS measures dealt with the protection of human, plant and animal health, to treat all such SPS 
measures as environment -related would be misleading.  This was the issue Japan had been 
considering with respect to which measures to consider as environment -related.  Japan asked the 
Secretariat to clarify the criteria used t o select the environment -related notifications in the SPS 
Agreement.  
166. The representative of India  was interested in examining whether any absolute gaps in 
transparency existed, as noted in paragraph 3 of WT/CTE/W/77.  India supported the proposals in 
WT/CTE/W/78.  He proposed that modifications to the glossary of search words should take into 
account the words "environmental technology".  
167. The representative of Malaysia, on behalf of ASEAN , supported the proposals in 
WT/CTE/W/78.  
168. The representat ive of Mexico  stated that her delegation had no objection to the proposals in 
WT/CTE/W/78.  Mexico shared Japan's concern with respect to the criteria used to define 
environment -related measures, which was an issue requiring further study in the CTE.    WT/CT E/M/17  
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169. The representative of Brazil  considered that, at this stage, the development of an EDB should 
focus on the most feasible options.  The use of key words were appropriate criteria to capture the 
majority of environment -related notifications.  The glossary of search words would have to be 
enlarged to cover further environment -related notifications.  Brazil agreed to instruct the Secretariat to 
conduct an Interim Review of the appropriateness of the search words used in the compilation of the 
EDB.  Concerning  the EDB's dissemination, Brazil would not oppose the creation of an Internet 
hyperlink to be included in the DDF.  However convenient this possibility might be, it may be costly.  
As such, Brazil supported the proposals to undertake a Comprehensive Review  of all environment -
related notifications to continuously update the EDB, such as had been completed for 1997 in 
WT/CTE/W/77.  
170. The representative of the United States  said it would be fruitless for the CTE to try to agree 
on the definition of an enviro nmental measure.  The only way the EDB could work would be if 
flexibility were given to the Secretariat to exercise its judgement and it was clearly stated that there 
was no agreement on what constituted an environmental measure.  The glossary of search wo rds 
would need to be continuously updated.  For example, there was a gap between the fisheries -related 
notifications in WT/CTE/W/80 and WT/CTE/W/77.  It would be valuable to have the EDB available 
in a format which would be immediately available to the pub lic as the notifications it contained were 
not restricted documents.  He proposed that WT/CTE/W/77 be derestricted as the first yield of a 
process which had been agreed at the 1996 Ministerial Conference, particularly in view of the 
forthcoming Ministerial . 
171. The representative of the Secretariat  said that in order to ascertain the cost of electronic 
dissemination of the EDB, a hyperlink would need to be set out in detail.  The criteria which had been 
used in compiling the EDB were set out in paragraph 4  of WT/CTE/W/78;  this glossary of search 
words would be continuously modified based on delegations' suggestions.   
172. The Chairman  said he would consult on the proposed derestriction of WT/CTE/W/77.  
173. The CTE adopted  the proposals for the Environment al Database as set out in paragraph 7 of 
WT/CTE/W/78 in fulfilment of the recommendations contained in paragraph  192 of the 1996 Report 
of the CTE to the Singapore Ministerial Conference (WT/CTE/1).  
Other Items  
174. The representative of India  requested hi s delegation's statement in response to some of the 
comments which had been made on India's paper, WT/CTE/W/66, on the issue of market access and 
the  transfer of environmentally sound technology, be circulated as a CTE working document.  As the 
EC had men tioned with reference to eco -labelling, India felt that there was no need to adopt a narrow 
approach with respect to the market access cluster.  
175. The CTE expressed  its appreciation for the substantive contribution of Mr. Scott Vaughan to 
work on trade a nd environment as a Member of the WTO Secretariat.  WT/CTE/M/17  
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ANNEX  
COMMITTEE ON TRADE AND ENVIRONMENT  
Work Programme and Schedule of Meetings for 1998  
1. As agreed in the 1997 Report of the Committee on Trade and Environment (WT/CTE/2), the 
CTE will continue to bro aden and deepen the analysis of all Items on its work programme based on 
the "cluster approach" under the themes of market access and the linkages between the multilateral 
environment and trade agendas.  Time will be allotted for Members, if they so wish, to return to Items 
discussed at the previous meeting.  
2. At the meeting on 19 -20 March, the CTE will address those Items relevant to the theme of 
market access, including:  
Item 2:   the relationship between environmental policies relevant to trade and envi ronmental 
measures with significant trade effects and the provisions of the multilateral trading 
system;  
Item 3:   the relationship between the provisions of the multilateral trading system and:  
(a) charges and taxes for environmental purposes;  
(b) requirem ents for environmental purposes relating to products, including 
standards and technical regulations, packaging, labelling and recycling;  
Item 4:   the provisions of the multilateral trading system with respect to the transparency of 
trade measures used for environmental purposes and environmental measures and 
requirements which have significant trade effects;  and  
Item 6:   the effect of environmental measures on market access, especially in relation to 
developing countries, in particular to the least develop ed among them, and 
environmental benefits of removing trade restrictions and distortions.  
3. At a meeting on 23 -24 July, the CTE will discuss the Items related to the linkages between 
the multilateral environment agenda and the multilateral trade agenda, i ncluding:  
Information session with selected Secretariats of Multilateral Environmental Agreements;  
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;  
Item 5:   the relationship between the dispute settlement mechanisms in the multilateral trading 
system and those found in multilateral environmental agreements;  
Item 7:   the issue of exports of domestically prohibi ted goods;  and  
Item 8:   the relevant provisions of the Agreement on Trade -Related Aspects of Intellectual 
Property Rights.  
4. On 26 -28 October, the discussions of the CTE will include:  
Items under the market access cluster (Items 2, 3, 4 and 6);  
Items und er the linkages between the multilateral environment and trade agendas cluster (Items 1, 5, 7 
and 8);  
Item 9:   the work programme envisaged in the Decision on Trade in Services and the 
Environment;   WT/CT E/M/17  
 Page 47 
 
 
Item 10:  input to the relevant bodies in respect of approp riate arrangements for relations with 
intergovernmental and non -governmental organizations referred to in Article V of the 
WTO;  and  
Report of the CTE to the General Council at the end of 1998.  
__________