RESTRICTED
WORLD TRADE WT/CTE/W/39
24July1996
ORGANIZATION(96-2928)
Committee onTrade andEnvironment
THE RELATIONSHIP BETWEEN THE PROVISIONS OFTHE MULTILATERAL TRADING
SYSTEM AND TRADE MEASURES FOR ENVIRONMENTAL PURPOSES,INCLUDING
THOSE PURSUANT TOMULTILATERAL ENVIRONMENTAL AGREEMENTS
(MEAS)
Proposal from ASEAN
EXECUTIVE SUMMARY
Aim
Thispaper proposes interaliaamulti-year waiver option, onacase-by-case basis,
accompanied bytheuseofnon-binding guidelines, asanalternative approach toaddressing the
issue ofMEAs andMembers 'obligations under theWTO. Theelements oftheproposal areas
follows:
Thewaiver option accompanied bynon-binding guidelines
1. Thisoption willextend tobothexisting andfuture MEAs. Under thisoption, specific
trade measures contained inMEAs mayberecognized onacase-by-case basis, asexceptional
circumstances qualifying forawaiver under Article IXoftheMarrakesh Agreement establishing
theWTO, subject totheapplication ofthefollowing non-binding guidelines:
- necessity;
- leasttrade restrictiveness;
- effectiveness;
- proportionality;
- thedegree ofscientific evidence.
2. Non-specific trade measures pursuant toMEAs andtheuseofunilateral trade measures
notpursuant toMEAs willbesubject tostatus quo,i.e.thecurrent scope ofGATT Article XX
doesnotallow aWTO Member totakesuchextra-jurisdictional measures against other WTO
Members toprotect extra-jurisdictional environmental resources.
3. Inaquidproquofortheopening ofan"environmental window" inrelation tospecific
measures included inMEAs, WTO Members shallformally agree nottoinfuture resort totheuse
ofnon-specific measures pursuant toMEAs andtheuseofunilateral extra-jurisdictional trade
measures toprotect extra-jurisdictional environmental resources.
4. Pursuant toparagraph 3oftheUnderstanding inRespect ofWaivers ofObligations under
GATT 1994, therights ofWTO Members toresort toWTO non-violation dispute settlement
action ispreserved withregard tomeasures forwhich awaiver hasbeengranted.WT/CTE/W/39
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Benefits
5. Thebenefits ofthemulti-year waiver option are:
(i) itstemporary nature which allows theWTO opportunity torevisit thearea. As
there hasbeenlittleprevious experience inintegrating MEAs intothemultilateral
trading system, andasthenature ofthemultilateral treading system isdynamic, it
isprudent thatacautious approach beadopted.
(ii) Itpreserves theroleoftheWTO asatrade regulating body. Themajority
decision required foranMEA tobegranted awaiver willreflect broad agreement
thattheenvironmental issue inquestion isofmultilateral concern, without aneed
fortheWTO toarrive atadefinition foranMEA.
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I. INTRODUCTION
1. Thedecision toestablish theCTE came atatimewhen there waswide-spread recognition
thattheuseoftrade measures inMEAs could leadtoalarge number oftrade disputes under the
WTO. Three years later, suchfears appear unfounded. Nodispute hasyettobebrought tothe
WTO withregard totheuseofspecific trade measures included inMEAs.
2. Future MEAs1willcontinue toresort totheuseofdiscriminatory trade measures
inconsistent withcurrent WTO provisions. Coupled withthelikelihood thatexisting MEAs would
toughen theirtrade restrictive provisions, thediscriminatory trade effects ofMEAs willcontinue
toescalate. Thus, forsystemic reasons itisnecessary toinstil clarity andpredictability tothe
current unsatisfactory situation.
3. Itisimportant tonotethatthetypes oftrade measure usedinMEAs varyandaretailored
toattain different environmental objectives.2Hence, discriminatory trade measures incorporated
inexisting MEAs should notbeusedasaprecedent forothers.
4. Ithasoften beenargued thatdiscriminatory trade provisions vis-à-vis non-parties are
necessary inMEAs toovercome theproblem related to"free rider". Although ASEAN is
supportive ofmultilateral efforts toaddress environmental concerns, itfirmly believes that
discriminatory trade measures should notbeusedtocoerce countries tobecome signatories toan
agreement. Instead, the"free rider" problem should beresolved through theuseofpositive
measures. Discriminatory trade provisions vis-à-vis non-parties should onlybeusedsparingly and
onlyifabsolutely necessary assubsidiary measures inensuring theeffectiveness oftrade measures
between parties toanMEA. Environmental concerns areincreasingly taking onatransboundary
nature. International cooperation rather thaninternational coercion offer thebestsolution in
addressing these problems.
5. Moreover, theextent ofsome ofthetrade provisions incorporated inMEAs remain
questionable. Forinstance, environmentalists themselves haveexpressed concern oversome of
thediscriminatory measures intheBasel Convention, e.g.,theConvention imposes trade
restrictions onrecyclable products suchasscrap metals which havebothsignificant commercial
andenvironmental value. Isitnotarguably more beneficial totheenvironment toencourage
recycling, especially inrelation totheconservation ofresources?
6. TheMontreal Protocol, which isfrequently considered asoneofthemost effective
MEAs, combines discriminatory trade measures withpositive measures liketheprovision of
technical andfinancial assistance under theMultilateral Fund. Astheoverall performance ofthis
MEA isdependent onacombination ofmeasures, itisdifficult toascertain theindependent
effectiveness oftrade restrictive measures. Thelackofempirical evidence doesnothelp.
7. Thus, forthereasons elaborated above, itwould beunwise toaccommodate all
discriminatory trade measures intothemultilateral trading system.
1Such asthose inrelation toenergy, forestry andfisheries.
2Asevident from acomparison ofthemajor MEAs which include trade measures.WT/CTE/W/39
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II. ANEXPOST WAIVER APPROACH ACCOMPANIED BYNON-BINDING
GUIDELINES
8. ASEAN believes thatunder GATT Article XX,itisnotpossible foraWTO Member to
takeextra-jurisdictional trade measures against other WTO Members toprotect extra-jurisdictional
environmental resources. Discriminatory trade measures should notandhavenotproven tobethe
bestoption inaddressing environmental concerns. Inthisregard, MEAs should avoid theuseof
suchmeasures unless absolutely necessary andasa"lastresort" toachieve environmental
objectives.
9. Thetemporary nature ofawaiver iserroneously considered bysome WTO Members to
beadisadvantage. Astrade andenvironment isrelatively newtotheWTO, itisprudent thata
cautious approach beadopted. Justasthenature offuture trade measures inMEAs cannot be
known inadvance, thefullimplication ofaccommodating trade measures inMEAs within the
multilateral trading system cannot beknown untilmuch later. Thewaiver approach hasthe
advantage, bybeing temporary, ofallowing theWTO theopportunity tore-visit theissue in
future.
10. Hence, thewaiver option doesnotpreclude other substantive alternatives thatmayemerge
inthefuture. Asthere hasbeenlittleexperience inintegrating MEAs intothemultilateral trading
system, theentire process should beviewed asacautious butincremental approach toaddressing
theissue. Theexpostwaiver accompanied bytheuseofnon-binding guidelines provides a
starting point tobringing environmental needs intotheWTO, notanendpoint.
III. STEP 1:THE SPECIFICITY OFMEASURES
11. Toinstil greater certainty andpredictability intheuseoftrade measures embodied within
MEAs, ASEAN agrees withbothNewZealand andKorea ontheneedtodistinguish between
specific measures incorporated inMEAs and"non-specific measures pursuant toMEAs".
12. Forthepurposes ofASEAN 'sapproach, onlyspecific measures (whether between Parties
orvis-à-vis non-parties toanMEA) would qualify tobeconsidered forawaiver. Non-specific
measures (whether between Parties orvis-à-vis non-parties toanMEA) areexcluded from
consideration. Thelatter istopromote greater certainty intheuseoftrade measures pursuant to
MEAs andasasafeguard against abuse forprotectionistic purposes.
13. Specific measures vis-à-vis non-parties havebeenincluded astheymaysometimes be
absolute necessary toachieve theenvironmental objectives. Thestrength ofthelatter maybe
eroded iftrade withnon-parties were tobeallowed, especially inthecasewhere anon-party isa
significant exporter ofproducts restricted orbanned under anMEA. Ironically, suchamove,
could helpensure thatsuchtrade measures would notbeusedsolely tocoerce non-parties into
becoming signatories toanMEA. Thisisbecause forthemeasures tobewaived, theymust be
deemed absolutely necessary i.e.assubsidiary measures inensuring theefficacy oftrade measures
between Parties. Furthermore, suchanapproach would encourage theuseofpositive measures in
dealing withtheproblem of"free riders".
14. Non-specific discriminatory trade measures pursuant toanMEA should beavoided to
promote certainty andpredictability. Thesame would apply tounilateral extra-jurisdictional
discriminatory measures. Forboththese forms ofmeasures, ASEAN advocates themaintenance
ofthestatus quoasitisnotpossible under thecurrent scope ofGATT Article XXtotake
extra-jurisdictional trade measures against other WTO Members toprotect extra-jurisdictionalWT/CTE/W/39
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environmental resources. Inaccordance withPrinciple 12oftheRioDeclaration, countries
should andmust remain firmly committed toamultilateral approach asthemost effective wayof
tackling global andtransboundary environmental problems.
IV. STEP 2:THE SETTING OFNON-BINDING GUIDELINES
15. Itisnecessary tosetnon-binding guidelines fortheapplication ofawaiver asthese would
provide bothexantepredictability forMEA negotiators andalsosetparameters fordispute
settlement panels considering environment-related disputes. Such guidelines would bebased on
theneedtoexamine anyspecific discriminatory trade measure against criteria suchasnecessity,
leasttrade restrictiveness, effectiveness, proportionality andthedegree ofscientific evidence.
Such anexamination oftrade measures isnecessary toensure thattheydonotconstitute arbitrary
orunjustifiable means ofdiscrimination ordisguised restrictions.
16. Theguidelines willplayanimportant roleinensuring thattrade restrictions incorporated
inMEAs donotgobeyond whatisabsolutely necessary intheachievement oftheirenvironmental
objectives, asMEA negotiators willmake every effort tocomply withtheguidelines inorder to
begranted awaiver. Inshort, these guidelines willserve asexanteguidelines forMEA
negotiators.
V. STEP 3:MULTI-YEAR WAIVER
17. Amulti-year waiver isgranted inaccordance withArticle IXoftheMarrakesh
Agreement3and,thereafter, subject toregular annual review.4Aslongasthetwobasic
requirements forawaiver, i.e."exceptional circumstances" andthe"terms andconditions" are
met,thewaiver istobeextended annually untilitstermination.
18. Forthepurposes ofASEAN 'sapproach, "exceptional circumstances" would referto
specific trade measures included within MEAs. Thisdoesnotmean thatsuchmeasures are
unusual butrather thattheyrequire special attention under themultilateral trading system. The
review process isnotburdensome asitdoesnotrequire voting butonlytheidentification ofthe
continued existence ofpreviously accepted requirements.
19. There havebeenanumber ofcircumstances where multi-year waivers havebeengranted
andsubjected toannual review.5Nontime-bound waivers havealsobeengranted inselected
cases.6Itisworth noting thatofthe115original waiver decisions byGATT Contracting Parties7,
3Paragraph 4ofArticle IXoftheMarrakesh Agreement Establishing theWTO provides formulti-year waivers, anditmakes
specific review andextension procedures available forsuchwaivers. Paragraph 3ofArticle IXprovides theprocedures and
requirements forawaiver request. Itexplicitly provides thatarequest forawaiver besubmitted pursuant tothepractice of
decision-making byconsensus. Ifconsensus isnotreached, adecision togrant awaiver shallbetaken bythree-fourths ofthe
Members.
4Intheintervals between meetings oftheMinisterial Conference, itsfunctions shallbeconducted bytheGeneral Council.
5Adetailed listofthese canbefound intheAnalytical Index oftheGATT.
6Ibid.
7Asof1April 1994. Seefootnote 5ibid.WT/CTE/W/39
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tenwere granted tomore thanoneContracting Party (these included three requested bytheEU8,
twobyallContracting Parties9andonebyalldeveloped Parties10).
20. Toqualify forawaiver, anMEA must obtain thesupport ofthree-quarters ofWTO
Members. Theneedforamajority decision would initself ensure thattheMEA meets thebasic
requirement ofbeing atrulymultilateral agreement assuchadecision would beindicative ofthe
broad participation ofMembers inanMEA. Thisapproach overcomes toacertain extent, the
needforadefinition ofanMEA asrequired bymost other proposals. Asevident from previous
discussions, arriving atanacceptable definition ofanMEA mayprove extremely problematic.
Theneedforsubjective interpretation ofcriteria isfurther complicated bythefactthatadefinition
must bebroad enough toencompass bothexisting andfuture MEAs, andyetnarrow enough to
ensure thatthese agreements would notbeabused toarbitrarily orunjustifiably curbontrade.
21. Only twowaiver requests haveeverbeendenied bytheWTO.11Intheevent thatwaiver
isdenied, Contracting Parties totheMEA canamend themeasures foraccommodation intothe
multilateral trading system. Thisaspect ofthewaiver hasbeencriticised asallowing theWTO to
restrict thescope ofMEAs onthepremise thatWTO provisions predominate overthose contained
within MEAs. However, bythesame token, whyshould itbeassumed thattrade measures
incorporated within MEAs predominate overWTO obligations? Most oftheproposals onthis
issue seem tostemfrom suchanassumption. Furthermore, although ithasbeenargued thata
waiver approach would leadtotheWTO being the"judge andjury" ofMEAs, isitnotalsothe
casethatother approaches would alsoatsome point intheprocess, entail subjective interpretation
ofMEAs suchastheneedforadefinition ofan"MEA" andtheterm"environment"?
VI. GATT ARTICLE XX,MEASURES PURSUANT TOMEAs AND UNILATERAL
EXTRA-JURISDICTIONAL TRADE MEASURES
22. Inaquidproquoforthecreation ofan"environmental window" viatheex-post waiver
approach, WTO Members shallformally agree nottoresort toboththeuseofnon-specific
measures pursuant toMEAs andtheuseofunilateral extra-jurisdictional trade measures pursuant
toenvironmental objectives. Although ASEAN believes thatthecurrent scope ofGATT
Article XXdoesnotallow forextra-jurisdictional measures, aformal agreement would inject
certainty andclarity tothecurrent situation.
23. Aformal agreement would alsoserve asapositive stepinencouraging developing
countries tobecome signatories toMEAs. Akeyreason whycertain developing countries have
beenreluctant andhesitant intheirattitude towards MEAs isthattheconclusion ofanMEA does
notnecessarily ruleouttheuseofunilateral extra-jurisdictional trade measures.
8Ibid.
9Ibid.
10Asof4April 1994, ibid.
11Asof4April 1994, ibid.WT/CTE/W/39
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VII. THE WTO DISPUTE SETTLEMENT MECHANISM
24. Paragraph 3oftheUnderstanding inRespect ofWaivers ofObligations under GATT 1994
specifies thatWTO non-violation dispute settlement action ispreserved withregard tomeasures
forwhich awaiver hasbeengranted. Thepotential fornon-violation compensation should and
neednotbeseenasanegative feature ofthewaiver approach. Rather, theopportunity toobtain
compensation, ifmerited, mayleadtocountries being more forthcoming inthegranting ofa
waiver ascompensation provides asafety netincases ofnullification andimpairment. Itshould
alsobeborne inmind thatcases ofnon-violation mayalsoariseunder thestatus quo.
25. Thisproposal isnotintended inanywaytoaffect therights ofWTO Members tobring a
casebefore aWTO dispute settlement panel should Members consider theirrights infringed
following theimplementation oftrade measures pursuant toMEAs. Under international law,
GATT 1994 inthecontext oftrade canberegarded as"lexspecialis derogat generali" ,
i.e.asbeing themore specific agreement inrelation totrade. Itisimportant tokeepthisinmind
asthisisapplicable evenindisputes between twoMembers toanMEA overtheinterpretation of
theuseoftrade measures within theMEA.
26. Inthisconnection, tobalance therightofWTO Members tousethedispute settlement
mechanism, ASEAN proposes thatforenvironment-related cases thepanels mayresort totheuse
ofindependent experts, including experts from outside theWTO. Thisisinlinewiththe
Uruguay Round reforms totheWTO dispute settlement mechanism.
VIII. RECOMMENDATION
27. ASEAN 'scurrent proposal willextend tobothfuture andexisting MEAs, andincludes the
following elements:
(i) Specific trade measures contained inMEAs mayberecognized, onacase-by-case
basis, asexceptional circumstances qualifying forawaiver under Article IXofthe
Marrakesh Agreement establishing theWTO, subject totheguidelines under
paragraph (ii)below.
(ii) Aneedtoexamine thespecific trade measures under thefollowing principles:
- necessity;
- leasttrade restrictiveness;
- effectiveness;
- proportionality;
- thedegree ofscientific evidence.
Measures needtobebroadly examined insuchacontext toavoid abuse for
protectionistic purposes.
(iii) Inrelation tonon-specific trade measures pursuant toMEAs andtheuseof
unilateral trade measures, ASEAN advocates themaintenance ofthestatus quo.
ASEAN firmly believes thatitisnotpossible under thecurrent scope ofGATT
Article XXtotakeextra-jurisdictional trade measures against other WTO
Members toprotect extra-jurisdictional environmental resources.WT/CTE/W/39
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(iv) Inaquidproquofortheopening ofan"environmental window" inrelation to
specific measures included inMEAs, WTO Members shallformally agree notto
resort totheuseofnon-specific measures pursuant toMEAs orofunilateral extra-
jurisdictional trade measures toprotect extra-jurisdictional environmental
resources.
(v) Without prejudice toparagraph (i),therightofanyWTO Member toresort to
WTO non-violation dispute settlement action ispreserved withregard tomeasures
forwhich awaiver hasbeengranted. Thisispursuant toParagraph 3ofthe
Understanding inRespect ofWaivers ofObligations under GATT 1994. Itis
especially important inthecontext ofWTO Members whoarenotparties to
MEAs.
IX. CONCLUSION
28. Anexpostwaiver granted onacase-by-case basis andcomplemented bynon-binding
guidelines, provides ameasured andincremental response tothepossibility thatinfuture itmay
benecessary toinclude discriminatory trade measures inenvironmental agreements, andthatthe
nature ofsuchmeasure cannot beanticipated. Theinclusion ofnon-binding guidelines willensure
thatthesubject ofdiscriminatory trade measures pursuant toMEAs willbedealtwithinamanner
consistent withbothenvironmental andtrade objectives. Thepossibility ofthenon-binding
guidelines evolving intoamore permanent codeshould notbediscounted, especially ifthese
guidelines prove effective. However, forthetimebeing, suchanextension isnotnecessary.
29. ASEAN 'sproposal allows foraflexible approach whereby theinterests ofbothregimes
willbepreserved. MEA negotiators willstillbeabletousediscriminatory trade measures if
absolutely necessary toachieve theirenvironmental objectives, whilst WTO Members willretain
therighttoraisejustifiable trade implications within theWTO through itsdispute settlement
mechanism. Itwould alsoensure thatbothregimes willwork towards greater co-ordination inthe
achievement oftheirdiffering objectives. InASEAN 'sview, thisoffers abalanced approach
which takes intoaccount theinterests andneeds ofbothdeveloped anddeveloping countries.
30. Lastly, itremains afactthatthecurrent debate intheCTE hascentred mainly onItem1
andthatthere hasbeeninadequate discussion onitem6inrelation tomarket access. Itis
important tokeepinperspective thatcountries aredependent ontrade asanimportant source of
economic growth andprosperity. Thus, itisimperative thatanydiscussion ontrade and
environment beinthecontext ofsustainable development, taking intoaccount thesynergies
between trade liberalization, economic development andtheattainment ofhigher environmental
standards. InASEAN 'sopinion, itisfurther trade liberalization within thecontext ofItem6of
theCTE work programme rather thanthelengthy discussions onItem1which offers thekeyto
ensuring environmental protection initsbroadest context. Thehindering ofeconomic growth will
notresult ingreater environmental protection.