6:26 AM Jan 27, 1994

CPS SUPPORT FURTHER WORK ON ENVIRONMENT LINKAGES

Geneva 26 Jan (Chakravarthi Raghavan) -- GATT contracting parties, at their annual session this week, gave wide support for further work in the GATT on the trade-environment linkages.

These views were voiced in the discussions over the second report of the GATT Working Group on Environmental Measures and International Trade (EMIT), presented by Amb. H. Ukawa of Japan.

The Uruguay Round TNC, at its meeting on 15 December, has agreed to develop a work programme on trade/environment questions to be presented to the Ministers at their meeting in Marrakesh to sign the Uruguay Round accords. The decision itself had been facilitated by the progress in the work of the Ukawa group -- bringing out both the convergence of North-South views in this area, as well as divergences.

The Ukawa report, the opening statement of the Chairman of the GATT CPs on Tuesday, and the comments of several developing countries, underscored some of these divergencies, including the determination of developing countries to resist attempts of some industrialized countries, pressed by some of their environmental/protectionist lobbies, to find 'short-cuts' for setting their own unilateral standards and forcing others to follow it through trade instruments.

Ukawa's statement introducing his 28-page report (on his own responsibility), and the brief comments -- mostly procedural complimenting him and his work, but a few of substance -- showed that the virtually antagonistic positions as between the developed and developing contracting parties over this issue (since it was raised in GATT two years ago) has now considerably changed and there was now a large consensus to find solutions to any real problems of environment protection.

Ukawa at a press briefing, and other GATT officials later, said that most cps were now clear that GATT should neither attempt nor set environmental standards or even try to harmonise them across countries or give blanket powers to use trade instruments for such standards. There was also a growing awareness of risks to everyone in trade restrictions to reflect Product Process Methods (PPMs).

While environmentalists often advocate this, and policy-makers in industrialized countries and the World Bank often talk of internalization of environmental costs and their reflection in prices. If, for example, countries claiming energy-efficiency, because of use of nuclear energy for power, were to internalize (and reflect it in energy prices) their current externalization of nuclear wastes, the energy costs would probably skyrocket.

The life of several of these radio-active elements in the wastes is thousands of years, and if this "cost" to succeeding generations, is discounted at the normal commercial practice of 10 percent, unit prices of energy to consumers would be several hundred-fold.

Environment NGOs and policy-makers wanting to do this would be given short shift by the public and consumers in their countries.

The GATT working group, which had been set up after the 1972 Stockholm conference on environment but had never met, had been reactivated in November 1991. It had been mandated to look into trade provisions of existing multilateral environmental agreements (MEAs) visavis the GATT principles and provisions; multilateral transparency of national environmental regulations likely to have trade effects; and trade effects of new packaging and labelling requirements aimed at protecting the environment.

In July 1993, the group was also asked to look into matters raised by UNCED and Agenda 21 in order to make trade and environment policies mutually supportive.

Because of the preoccupation with the Uruguay Round over the last several months, this last has not been followed up, but the group is expected to do so soon. A Special Session of the GATT Council is also being planned for end of February for the follow-up to the UNCED.

In summing up the discussions in the EMIT Ukawa said in his statement that there was a widely shared conviction among GATT cps that there need no be, nor should be, any policy contradiction between upholding the value of the multilateral trading system and the protection of environment. There was also wide acceptance for the view that GATT provides wide scope for governments to use trade-related policies to protect national environmental resources without calling into question their GATT obligations. Also, where trade measures were needed in MEAs, most often the design and implementation of such measures need not involve action beyond what was available to cps in GATT.

In the discussions on trade measures in existing MEAs (Montreal Ozone protection treaty and protocols, the Washington Convention on Endangered Species and the Basle Convention on Control of transboundary movements of hazardous wastes and their disposal), GATT cps welcomed efforts to seek cooperative solutions to environmental problems through MEAs and believed this was more durable and effective than ad hoc resort to unilateral trade measures, Ukawa said.

Also, future conflicts over trade provisions in MEAs would be minimised through better coordination between trade and environment ministries in national capitals.

An area of divergence, brought out in the Ukawa statement and report, relates to use of trade measures to protect environment resources falling outside national jurisdiction of any cp, and trade provisions in MEAs relating to non-parties to the agreement.

Several delegations, Ukawa said, stressed need for caution in negotiating such MEAs over including such trade provisions at all. Nor was it desirable or necessary to use discriminatory trade measures against non-parties to an MEA. While such measures might appear to be an attractive means of enforcing the provisions of an MEA, their effectiveness is not always beyond doubt and the full costs of using them could be high. These need to be carefully taken into account.

Ukawa said despite deep-seated reservations of many delegations -- on the basis of not rejecting any notion out of hand nor of accepting any concept at face value -- the group had been able to explore analytically different approaches to resolve possible conflicts.

An approach available in GATT was to consider trade measures in any MEA on a case-by-case basis, notably through the provisions in Art XXV for grant of waivers. The merit of such an approach, in the view of many, was that the remedy could be made to fit the problem and provide a measured, case-by-case response to any problem that might arise in future.

"Where an MEA reflected a genuine multilateral consensus, it would find broad support among GATT cps and there need be little, if any, uncertainty about chances of securing a waiver," Ukawa said, adding that the onus to demonstrate and convince others of the case would remain the responsibility of those seeking a waiver -- in lien with a time honoured tradition of GATT flexibility.

Some doubts had been raised about this, Ukawa noted.

An ex-post case-by-case approach, it was felt, might not provide negotiators of an MEA with necessary degree of predictability and security that it would not be challenged in the GATT and,,in the absence of a clear hierarchy among different, self-standing international agreements, a formal denial of waiver might create an untenable conflict of international obligations for cps.

These questions, Ukawa underlined, were however "political in nature" and did not detract from the availability of the waiver approach.

The Group, he said, had also discussed the possibility of defining in advance, conditions for use of trade measures in the context of an MEA, and ensure that if the conditions were met GATT could accommodate the measure -- for e.g. through a collective interpretation of applicability of the GATT's Art. XX provisions, when trade measures are applied to non-parties to the MEA.

While such an ex-ante approach would bring predictability and security to the particular MEA negotiators, there were also concerns that such an approach could upset the existing balance of GATT rights and obligations. The provisions of an MEA, or judgement of parties to it, could not be allowed to override the existing balance of GATT rights and obligations, especially without an obligation to explain the case for trade discrimination against non-MEAs to the GATT CPs.

A more practical doubt was whether any single formula for such an approach was general enough to meet all legitimate requirements.

There were also questions about the definition of an MEA, whether the MEA is at all necessary and needs discriminatory trade measures against non-parties to the MEA.

[There is no agreed definition of a multilateral treaty in international law, and a treaty among three countries would be 'multilateral' -- and could provide a cover for protection and discrimination against outsiders]

On the question of multilateral transparency of national environmental regulations with likely trade effects, Ukawa said delegations were of the view that the current GATT provisions, especially those supplemented by the Uruguay Round accord (on Technical Barriers to Trade), created a broad basis for multilateral transparency. Ex-ante notifications might be desirable, but ex-post notifications when properly made, would meet the objectives.

There was some concern though about adequacy of transparency of economic instruments, such as measures by sub-federal government authorities and by private sector.

[Under the Uruguay Round TBT accord, federal authorities would still have obligation to notify measures taken by sub-federal governments and authorities, as well as those by private bodies backed or authorized by laws and regulations, while purely private agencies would be 'encouraged' voluntarily to notify such measures].

On the questions relating to packaging and labelling requirements, instruments being increasingly used by many governments, Ukawa's statement did not attempt to sum up the outcome. The group, he noted, had however just begun to identify generic issues for further analysis.

These included the practical distinctions between voluntary and mandatory measures and their implications for trade; approaches to setting of criteria and threshold levels in design of measures; scope of standardisation or harmonisation and mutual recognition; complications for trade as a result of setting requirements in terms of PPMs rather than product characteristics; and special difficulties and costs that might face small-size foreign suppliers, particularly from developing countries.

It was also stressed in this regard that eco-labelling, whether a product has been tested or otherwise, could result in lack of such a label being taken as a sign of undesirable characteristics for the product and have an impact on competitive conditions.

Ukawa's report brought out that in the case of packaging and labelling requirements incorporating PPMs, mere application of GATT's national treatment obligations, in a narrowly defined sense, might not be sufficient to ensure avoidance of unnecessary obstacles to trade.

Applying the same PPM standards to products would not necessarily result in imported products being treated no less favourably than domestically produced products if the PPM in question is not suitable to the conditions, including environmental conditions, prevailing in the country of origin of the imported product.

In the case of packaging requirements, the Ukawa report showed that discussions have focused on stipulations on kinds of packaging that could or could not be used in a particular market and those prescribing recovery, re-use, recycling or disposal of packaging after original use.

Several countries have expressed concern, during the discussions, on recycled required content requirements, in respect of products and packaging from countries where the recycled material might not be readily available or costly. The questions were raised about whether recycling content requirements should at all be applied to imports, in view of their limited effectiveness in achieving the environmental objective of reducing pressures on waste disposal in countries imposing them.

Doubts were also raised on use of trade measures to reduce resource-intensity of packaging, both over the question whether any one country should impose its environmental standards on another, as also the danger of presuming that the same resource endowments and constraints apply to all countries.

In some brief comments, Hong Kong noted that the discussions in the group had encouraged more developing countries to participate in its work, and in the future developing countries would be even more active.

The EC said GATT was on the threshold of a new era and two basic principles must guide its work: multilateral must prevail over unilateral measures and the work to be done must be operational in nature. GATT must find a delicate balance between the need for each country to set its own environment standards and the needs of an open multilateral trading system. There was also need for tolerance in this area between developing countries and industrialized countries as well as NGOs.

At his briefing, Ukawa said that the group was agreed that GATT was not the instrument for setting environmental standards (whether of PPMs or others) and that other, more competent organizations, could set multilateral standards or harmonise standards where no uniform standards could be set.