DR.

RAM MANOHAR LOHIYA NATIONAL LAW

UNIVERSITY, LUCKNOW

Global Trade and Environment Issues

SUBMITTED TO- SUBMITTED BY-

Prof. Dr. Amandeep Singh Agrima Verma
RMLNLU VI Semester
170101009
 ACKNOWLEDGEMENT

It is my pleasure to recall the many people who have been involved more or
less directly in inspiration and production of this project. Firstly, I would like
to thank God for the knowledge he has bestowed upon me.
I take this opportunity to express a deep sense of gratitude and humble regards
to my subject teacher, Amandeep Sir, his keen interest, constant guidance,
encouragement and above all his consideration and understanding during this
trying time.
I also owe sincere thanks to my parents, teachers and friends for their endless
help and support without whom this project wouldn’t have been completed.
Finally, I wish to put on record this fact, that without the help given to me by
my teachers and parents, my project would have been in shambles and all
efforts would have been nullified.
It is hoped that the project will fulfil the expectations of the Dr. Ram Manohar
Lohiya National Law University, Lucknow.
 TABLE OF CONTENTS

>INTRODUCTION

>ORIGINS OF TRADE AND ENVIRONMENTAL CONFLICTS

>RESEARCH METHODOLOGY

>RECONCILING TRADE AND ENVIRONMENT

>ENVIRONMENT AND WTO PREAMBLE

>ENVIRONMENTAL SUBSIDY

>PRECAUTIONARY PRINCIPLE

>GMOs AND BIO-SAFETY

>INDIAN AND ENVIRONMENTAL ISSUES AT WTO

>CONCLUSION

>BIBLIOGRAPHY
 INTRODUCTION

 Origins of trade and environmental conflicts

International concern for the environment, except in particular areas such as marine pollution
and aircraft noise, is of relatively recent origin. Protection of the environment was not a major
issue when the General Agreement on Tariffs and Trade was drawn up. Not a word was said
about the environment in GATT 1947. The same is the case in the charter of UN and the
treaty of Rome establishing the European Economic Community. It was only in the beginning
of 1950s, a number of widely read books and films1 stimulated a world wide movement
dedicated to preservation of the environment.

Indeed, the GATT does not explicitly refer to the term environment. Until recently, trade
policymakers and environmental officials pursued their work on separate tracks, rarely
perceiving their realms as interconnected. Today, environmental protection has become a
central issue on the public agenda and trade and environmental policies regularly intersect
and increasingly collide. This reflects the fact that norms and institutions of international
trade remain rooted in the pre-environmental era that there exists no international
environmental regime to protect ecological values, to reconcile competing goals and
priorities, or to co-ordinate policies with institutions such as GATT.2

From a trade perspective, environmentalism looms large on the horizons of new issue and it
is viewed with some trepidation.3 This reflects, in part, evolution in the focus of trade
liberalization efforts. Now 148 countries ‘Contracting parties’ subscribe to the GATT rules
regulating trade and GATT has made great progress in its original goal of reducing tariffs .
As a result, attention has shifted to non-tariff barriers to the free flow of international trading
system has become a market access regime that goes well beyond concerns about bordere
controls, to cover international and domestic economic issues that require at least partial
harmonisation of variety of national policies.

1
Rachel Carson and Jaques-Yves, “The sea around us”,1951
2
Daniel c esty, Greening the Gatt,IIE,washington
3
Ibid
 The Tokyo round of GATT negotiations in the 1970’s consolidated the assault on non-tariff barriers
and produced a series of GATT codes to combat some of the obstacles. The Uruguay Round of
negotiations advanced the process further by adding new non- tariff concerns such as intellectual
property to the GATT agenda. Trade experts see this as a pattern to cutdown non-tariff barriers.
Some see this as protectionist interests finding new ways to bend trading system.4

 The Environmental Challenge

While the vituperative nature of some of the assaults on the international trade regime has been
excessive, the charge that trade and trade liberalisation can be environmentally counterproductive is
accepted even by the most ardent free traders. 5 Stripped of its ad hominem aspects, the
environmentalist’s challenge to free trade boils down to four central propositions:

A - Without environmental safeguards, trade may cause environmental harm by promoting

economic growth that results in the unsustainable consumption of natural resources and
waste production.

B- Trade rules and trade liberalisation often entail market access agreements
that can be used to override environmental regulations, unless appropriate
environmental protections are built into the structure of the trade system.6

4
S. shrybman, “international Trade and the environment”, 1990, pp. 33 ; www.wto.com/ps/enviro.asp
5
ibid
6
id
 C- Trade restrictions should be available as leverage to promote world wide
environmental protection, particularly to address global or transboundary
environmental problems and to reinforce international environment
agreements.7

D- Even if the pollution they caused does not spill over into other nations,
countries with high environmental standards have a competitive advantage
in the global marketplace and put pressure on countries with high
environmental standards to reduce the rigor of their environmental
requirements

 Reconciling Trade and Environment

Firstly, international trade and protection of the environment are both essential for the
welfare of mankind. In a majority of the matters, these two values do not come into conflict
with each other. Rather they supplement each other. 8 Section 2.19 of agenda 21, which was
adopted at the UN conference on Environment and Development in 1992 states that
“environment and trade policies should be mutually supportive. An open multilateral trading
system makes possible a more efficient allocation and use of resources and thereby
contributes to an increase in production and incomes and to the lessening of demands on the
environment protection. A sound environment, on the other hand, provides the ecological
and other resources needed to sustain growth and underpins the continuing expansions of
trade.”9

Secondly, it is beyond the scope of authority allotted to the WTO, to take active steps for
the protection of environment. Its function is rather confined to the successful
implementation of the provisions of various agreements covered under WTO. It is clear at

7
id
8
s charnovitz, “exploring the environmental exceptions in the gatt”, (1991) 25 Journal of the
world trade 37
9
id
the outset, from the provisions of the WTO, that the organisation has been established only
for the promotion of international trade and not for the protection of the environment. The
WTO agreements apply to measures protecting the environment only where and insofar as
they have an impact on international trade. Relatively very few of the environmental
measures fall into this category.10

Thirdly, nothing in the WTO agreements requires that free trade be accorded priority over
environmental protection. Rather, the preamble to the WTO agreement, acknowledges that
expansion of production and trade must allow of the optimal use of worlds resources in
accordance with the objective of sustainable development. It therefore, seeks both, to protect
and preserve the environment and to enhance the means for doing so in a manner consistent
with each member country’s respective needs and their concerns at different levels of
economic development.11

10
id
11
supra n.5
 Environment and WTO Preamble

Prior to the founding of the WTO in 1995, dispute settlement panels were
disinclined to give much weight to environmental, and other social policy
considerations in 'determining how trade and domestic policies should be craned for members to
comply with GATT non-discrimination obligations. However, reflecting the trend in international
agreements that makes specific reference to the need to balance the trade and economic objectives of
the GATT, GATS, TRIPS and other WTO agreements on the one hand and environmental policy
considerations on the other. The opening paragraphs of the Preamble to the Agreement Establishing
the World Trade Organisation States; The Parties to this Agreement, Recognising that their relations
in the field of trade and economic endeavour should be conducted with a view to raising standards of
living, ensuring full employment and a large and steadily growing volume of real income and
effective demand, and expanding the production of and trade in goods and services, while allowing
for the optimal use of the world's resources in accordance with the objective of sustainable
development. seeking both to protect and preserve the environment and to enhance the means for
doing so in a manner consistent with their respective needs and concerns at different levels of
economic development.12

By virtue of the reference to sustainable development and environmental goals in the Preamble, the
Appellate Body in the 1998 Shrimp Turtle decision determined that the negotiators of WTO
agreement were fully aware of the importance and legitimacy 13 of environmental protection as a goal
for national and international policy. They concluded that GATT and all other WTO. Agreements
must be read by a treaty interpreter in the light of contemporary concerns of the community of
nations about the protection and conservation of the environment.14

12
Sabrina Shaw and Risa Sauchwartz, “trade and environment in the WTO- State of play,
Journal of World Trade, 36(!), 929-154, 2002
13
ibid
14
id
The Appellate Body in US-Gasoline case emphasised the importance of the Preamble in the context
of environmental issues. The Appellate body affirmed "indeed in the preamble to the WTO
agreement and in the Decision on Trade and Environment, there is a specific acknowledgement to be
found about the importance of co-coordinating policies on trade and the environment. WTO
members have a large measure of autonomy to determine their own policies on the environment
(including its relationship with trade), their environmental objectives and the environmental
legislation they enact and implement. In so far as it concerns the WTO, that autonomy is
circumscribe only by the need to respect the requirements of the General agreement and other
covered agreements." 15

15
Thomas J. Shoenbaum, “International Trade and Protection of the environment”, 91 am j.
int’l L. 268 1997; www.wto.com/ps/enviro/thoshoe.asp
 The WTO-MEA Relationship

The relationship between WTO and Multilateral Environmental

Agreements-(MEA) was a hotly debated topic during the last decade. There are at least nearly 250
MEAs in existence, of which the WTO secretariat has identified 22 with potential trade policy
implications. Many of these agreements protect specific group and classes of flora and fauna, while
others facilitate the joint management of resources taken in the global commons and still others
focus on broader environmental problems.16

There are long-standing expectations about what the WTO can and should
deliver in this area. The first concerns WTO disciplines and the extent to whichthey accommodate
environmental concerns. In the CTE, some members have proposed that a legal framework be
developed to clarify the relationship between the WTO and MEAs, with specific reference to the
exceptions provision in article XX. Other WTO members would like to see other areas of WTO
disciplines clarified with respect to the environment, such as the TBT, SPS TRIPS and Agriculture
Agreements as well as GATS. Some other members would like to have environment related results
in some or all of these agreements, while others feel confident that environmental concerns are
already sufficiently dealt with these agreements. At this stage, individual proposals continue to be
submitted in the CTE and its various committees that oversee each agreement.17

The spectrum of proposals submitted to the CTE can be classified into four
broad categories. Firstly the status quo, approach which is based on the premise that the WTO
already has sufficient scope to accommodated the use of trade-related measures pursuant to MEAS
& same only a small number of MEAs contain trade measures, thus by far there has not been any
dispute- concerning trade measures applied pursuant to an MEA.18

The second approach is that of a waiver, under which WTO members would take a decision to
authorise members to denial from their obligations for a limited period of time. Given the range of
provisions in the WTO some members consider that WTO rules do not require any amendments. A
waiver is subject to adoption by consensus, although it is possible for a member to call for a vote,

16
www.wto.com
17
ibid
18
supra n.5
 which would be subject to approval by three quarters of WTO members. A waiver is time-limited
and can be renewed.19
The third type of approach may be considered to provide for clarification
of WTO rules. Many members have proposed for the adoption of an
understanding or guidelines. In order to allow for predictability for guidelines,
procedural and substantive Lriteria have been suggested.

Severall members have advocated that is fourth approach to clarify the

relationship between WTO-MEA along the lines of co-operation. Such a
clarification would increase predictability and legal certainly and avoid
unnecessary conflicts.23

Trade measures may include regulations on exports and or imports. These

may include outright prohibition or bans on trade, quotas and various licensing and registration
schemes. Trade measures may have many motivations.
International trade may expand or create markets that encourage over-exploilalion of resources.
Limiting or eliminating trade may assist national efforts to enforce limits on harvesting or to
eliminate poaching. In contrast, encouraging certain type of trade may ease the economic
burden of achieving conservation and environmental protection goals. Sometimes trade measures
that support environmental goals often conflict with the requirements ofGATT and other WTO
agreements and may not qualify f or one of the general exceptions provided by these agreements.
The thorniest problems lie in resolving conflicts emerging from actions taken by WTO members
participating in an MEA that adversely affect the commercial interests of other WTO members who
are not the participants in the MEA.

19
Daniel c esty, “greening the GATT”, 1999, IIE 12 ; www.wto.com
 ENVIRONMENTAL SUBSIDY

There has been increasing emphasis by many countries on 'win-win-win'

outcomes from future WTO negotiations, which would benefit trade, environment and sustainable
development. Several WTO members advocate for the removal of tariff escalation and tariff
peaks for forest and leather produces and subsidies in agriculture and fisheries in order to
contribute to both environmental protection and trade liberalisation.

While initial discussion concentrated on the benefits of eliminating

agricultural subsidies, recent proposals have highlighted the potential contribution of the WTO in
addressing the major trade distortion affecting the fisheries sector, i.e. subsidies. Following the
failure at Seattle US and some other countries are now striving to address those subsidies that
contribute to the unsustainable use of global fisheries recourses. The fisheries issues are a
complex and highly politicised matter and is part of the larger issue of sustainable fisheries
management. The complexities can be seen in the light of the recent wave of potential fisheries
related disputes. The depleted state of global fish stocks has become a major economic and
environmental concern—now central to the trade
and environment debate in the WTO. The potential contribution of the WTO,
which has a trade mandate, would be to examine the trade restrictions and
distortions that impact upon this sector.
(C) TRIPS AND BIODIVERSITY

Another long standing debate covering the relationship of trade and

environment is the compatibility of the TRIPS and the Convention on Biological Diversity (CBD).

The issue has got a new lease of life in the recent discussions in the CTE, TRIPS Council and the

CBD. The developing countries are advocating for the implementation of TRIPS and CBD in a

mutually satisfactory way. India has expressed the view that TRIPS Agreement is in conflict with

the CBD,because the provisions of TRIPS regarding private rights are having potential

to overrule the sovereign rights recognised by the CBD. Currently, nothing the

TRIPS agreement prevents a person from. patenting a genetic material, a plant, for instance-

originally form another country without having to fulfil some of the basic principles of the CBD,

such as benefit sharing prior, informed consent and protection of the traditional knowledge

associated with he genetic resource.20

20
A.k. Kaul , “trade and environmental law”, 1st ed. 2005, p 220
 PRECAUTIONARY PRINCIPLE
Although precaution is a fixture in both the Preambles and working articles
of many multilateral environmental agreements, recently the principle has been the focus of
intense debate in the area of food safety and GMOS. The
precautionary principle was first introduced in Germany in the 1984 International Conference
on the North Sea. Although the principle was not referred to as such, the agreement contained
the idea of limiting pollutants due to a lack of knowledge an in advance of proof of their
harmful effects.

The precautionary principle has been defined as taking precautionary

measures when there is insufficient scientific proof, yet when inaction could lead to
irreversible damage or risks to human health or the environment. The
controversial issue that surrounds the principle is not to the determination of whenthe threshold
shifts the burden of proof towards protection of the environment, or health or safety. This
threshold can be high, when it involves serious or irreversible harm to the environment, or
lower, when it may cause harm to the environment.21

The flexibility of the precautionary principle is its strength as well as its

weakness. It has been applied to many different environmental issues and is
subject to varying interpretations and has many definitions, in international
22
agreements. Several WTO members have complained that there is no
internationally agreed definition of the precautionary principle. They claim that although the
principle has been recognised in international agreements but it has not explicitly mentions in
23
the WTO, although several key provisions explicitly allow for precautionary action. The
concept of precaution which find mention in SPS agreement but in this agreement this is an
alternative to insufficient evidence provide by a risk assessment, instead of a policy tool that
allow sanction when the risk to the environment is considered to be unacceptable.

21
ibid
22
id
23
id
 GMOS AND BIO-SAFETY

The insecure status of the pre-cautionary principle in the WTO. the SPS
Agreement and in Hormones dispute raises interesting issues for the CTE in the new trade related
area of genetically modified organisms and food, safety. The framework regulation governing GM
foods are still in the process of evolution.
There is a greater concern among the developing countries for the protection of native species. Many
environmentalists have been looking at the Bio-safety
Protocol and WTO agreements, such as SPS and TBT agreements, to see whether this new
upcoming framework is compatible with WTO rules. The issue is not solely about compatibility. bill
also about bow signatories implement the provisions of the agreement.24

24
supra n. 20
 INDIA AND ENVIRONMENTAL ISSUES AT WTO

India has called for a moratorium on linking trade and environment unless
it clearly impinges on collective ecological security. It is not in favour of plain
protectionism being passed off as environmental concern. Further, it proposed to ensure that any
decisions which attempt to bring in environmental considerations to modify trade relations conform
rigorously to the RIO consensus;if trade advantages are to recede due to 'restrictions under the garb of
environment', it would not only hit the country's development efforts but also aggravate the
environmental problems themselves. In the country's opinion, the whole idea of international eco-
labelling based on processes amounted to legitimization of extra-territorial interference. However,
India ^dees not in disconformity that environmentally harmful processes should be stopped and
alsoover-exploitation of non-renewable resources should be controlled. India does not share the view
of North that forest conservation should imply leaving them untouched completely. 25
Forest in India are considered as community resource and therefore they are used by and large,
sustainably.

When environmental effects crossed national

boundaries, the affected nations, have the right and duty to safeguard their vital concerns. India is also
a signatory to the TBT as well SPS Agreements. Now there is a greater emphasis on bringing Indian
standards to international levels. Most standards in India are voluntary although heath and safety
regulations and mandatory -for several products. The BIS (Bureau of Indian Standards) is responsible
for formulating national standards and has so far formulated17,428 Indian standards for various
sectors. It is also engaged in harmonizing Indian standards with international standards26.

In order to understand and clarify the Doha Declaration and its effect trade and environment India has
made a submission (dated 20February, 2003) giving the views on interpretation of MEAs and other
specifictrade obligations. "India considers that MEA should have the following elements:27

(i)it should have been negotiated Under the aegis of the UN.
(ii) its procedure should stipulate the participation of all countries

25
P.K. rao, “International Environmental law and economics”, 1st ed 2002, p.254
26
id
27
supra n.20
(iii)effective participation of all the geographical regions;

(iv)the agreement must contain provisions for accession of fresh members.

Regarding STOs India has mentioned that the term 'specific trade obligation must contain three
elements together - the provision must be specific
with trade element and should be in the nature of an obligation.'
 CONCLUSION
Trade liberalisation and environmental protection share a common aim to enhance social
welfare by improving the quality of life. In pursuing for this
cherished common goal considerable amount of conflict arose over the adoption of
approaches and emphasis. The issues concerning environment have grown in prominence
for both domestic and international policy agendas. The
environmental issues affecting or effecting trade draws the attention of the policy
makers. The problem of environment has revealed the ecological inter-dependence. No
country has complete environmental independence. For the
redressal of the problem the international co-operation is required.

Just as environmental issues are increasingly shaping trade policy, the

economic inter-dependence of the world is influencing the dynamics of environmental
policy. There exists the linkage between trade liberalisation and environmental protection.
For this WTO has now laid the foundation for
reconciling the both actual as well as potential conflicts between international trade and
protection of the environment. Now it is up to the CTE and MinisterialL.Conference to
evolve the additional aspects of the trade and environment agenda.

The new trade and environmental conflicting issues especially in the area of food safety,.
Subsidies,- intellectual property and services, urgently required attention. There is an
urgent need to evolve a through and transparent decision making process to. be evolved
within the institutional framework of the WTO then only the conflict of trade and
environment can be reconciled.

There is also a need for the WTO to give specific recognition to

environmental values. Article XX (b) & (g) of the GATT 1994 might be amended to
provided a general exception for trade measures that are reasonably necessary for the
protection of the domestic environment. In addition, Article XX may also
be amended to provide a safe harbour for multilateral environmental agreements that
employ trade measures, which are reasonably necessary and reasonably
related to the subject matter of the agreement. Further there is a need for adopting.
 BIBLIOGRAPHY

 A.K. Kaul, “Trade and Environmental Law”, 1st ed. 2005, Bharat Law House, Jaipur

 Daniel c esty, “greening the Gatt”, IIE 1994 july , Washington DC.

 P.K. Rao, International Environmental Law and Economics, Blackwell Publishers, 2002

 Cairo A.R. Robb (ed.), “Trade and Environment”, International Environmental Law
Reprts, Vol 2, Cambridge Unviversity press, London

 S. Charnovitz, “Exploring The Environmental Exceptions in GATT”, (1991) 25 Journal

of World Trade

 Web Sources

 www.wto.com
 www.trade.com/enviro
 www.gstp.com
 www.tec.com/wto
 www.wiki-pedia.co.uk