Trade Ge Handbook

8/18/2019 Trade Ge Handbook

1/164

Trade and Green Economy A HANDBOOK

Tird Edition


2/164

Trade and Green Economy A HANDBO OK

Tird Edition

Te United Nations Environment Programme

Division o echnology, Industry and EconomicsEconomics and rade Branch

andTe International Institute or Sustainable Development


3/164


4/164

iii

Copyright © 2014 International Institute or Sustainable DevelopmentPublished by the International Institute or Sustainable DevelopmentAll rights reservedPrinted in Geneva, Switzerland

Citation: International Institute or Sustainable Development & United NationsEnvironment Programme. (2014). rade and Green Economy: A Handbook.Published by the International Institute or Sustainable Development, Geneva.

Copies are available rom UNEP and IISD. o order, please contact either o theproducers o the handbook:

Economics and rade Branch

Division o echnology, Industry and EconomicsUnited Nations Environment ProgrammeInternational Environment House11 – 13, Chemin des AnémonesCH-1219 ChatelaineGeneva, Switzerlandel: +41 22 917 8243Fax: +41 22 917 8076Email: [email protected]

International Institute or Sustainable Development161 Portage Avenue East, 6th FloorWinnipeg, ManitobaCanada R3B 0Y4el.: +1 (204) 958-7700Fax: +1 (204) 985-7710Email: [email protected] http://www.iisd.org

ISBN 978-1-894784-68-9

Disclaimer: Te designations employed and the presentation o the material in this publication donot imply the expression o any opinion whatsoever on the part o the United Nations EnvironmentProgramme concerning the legal status o any country, territory, city or area or o its authorities,or concerning delimitation o its rontiers or boundaries. Moreover, the views expressed donot necessarily represent the decision or the stated policy o the United Nations EnvironmentProgramme, nor does citing o trade names or commercial processes constitute endorsement.

mailto:etb%40unep.ch?subject=mailto:info%40iisd.ca?subject=http://www.iisd.org/http://www.iisd.org/mailto:info%40iisd.ca?subject=mailto:etb%40unep.ch?subject=


5/164

Trade and Green Economy: A Handbook

iv

The United Nations Environment Programme

Te United Nations Environment Programme (UNEP) is the overall coordinatingenvironmental organization o the United Nations system. Its mission is to provideleadership and encourage partnerships in caring or the environment by inspiring,inorming and enabling nations and people to improve their quality o lie withoutcompromising that o uture generations.

UNEP’s Economics and rade Branch (EB) is part o the Division o echnology,Industry and Economics (DIE). EB’s mission is to enhance the capacities ocountries, especially developing countries and countries with economies intransition, to integrate environmental considerations into development planning

and macroeconomic policies, including trade policies. A key workstream othe EB is the Green Economy Initiative (GEI), which is designed to assistgovernments in “greening” their economies by reshaping and reocusing policies,investments and spending, or example towards deployment o renewable energy,clean technologies, water services, sustainable transportation, waste management,green buildings and cities, and sustainable agriculture, orests and tourism.

Te trade component o EB’s work programme ocuses on improving countries’understanding o the intersection between trade and green economy. It includesresearch and capacity building at global, national and sectoral levels, on how touse trade as an engine or sustainable development and poverty eradication. EBalso provides technical input to the trade and environment debate through atransparent and broad-based consultative process. rade activities ultimately aimto oster mutually beneficial outcomes or trade and the environment, or exampleby identiying and harnessing trade opportunities that are associated with thegreen economy transition, particularly in developing countries.

For more inormation, please contact:

Anja von MoltkeHead, rade, Policy and Planning UnitDivision o echnology, Industry and EconomicsUnited Nations Environment Programme11–13, Chemin des AnemonesCH–1219 Châtelaineel: + 41 22 917 8137Fax: + 41 22 917 8076Email: [email protected]

http://www.unep.org/greeneconomy/greeneconomyandtrade

mailto:anja.moltke%40unep.org?subject=http://www.unep.org/greeneconomy/greeneconomyandtradehttp://www.unep.org/greeneconomy/greeneconomyandtrademailto:anja.moltke%40unep.org?subject=


6/164

v

The International Institute for Sustainable

Development

Established in 1990, the International Institute or Sustainable Development(IISD) is a non-partisan, charitable organization specializing in policy researchand analysis, and inormation exchange. Trough their head office in Winnipeg,Manitoba, Canada, and their branches in Ottawa, New York, Geneva and Beijing,the Institute champions sustainable development around the world throughinnovation, partnerships, research and communications. It is dedicated to engagingdecision-makers in business, government, non-government organizations andacademia on issues around economic and legal rameworks, energy and climate

change, water, resilience, and knowledge.IISD is registered as a charitable organization in Canada and has 501(c)(3) statusin the United States. IISD receives core operating support rom the Governmento Canada, provided through the Canadian International Development Agency(CIDA), the International Development Research Centre (IDRC) and EnvironmentCanada, and rom the Province o Manitoba. Te Institute receives project undingrom numerous governments inside and outside Canada, United Nations agencies,oundations, and the private sector.

IISD’s work in trade, investment and sustainable development seeks to find thoseareas o synergy where trade, investment, environment and development can bemutually beneficial, and to help policy-makers exploit those opportunities. Itconcentrates on two major themes in its work: reorm o trade and investmentrules and institutions, and building capacity in developing countries to addressthe issues o trade and sustainable development. Since 1991, IISD has worked tobroaden the terms o the trade-environment debates to encompass the concernsand objectives o developing countries—to make them evolve into debatesabout trade and sustainable development. All o IISD’s work aims to raise public

consciousness about the importance o the issues o sustainable development. Tishandbook, first produced in 2001 and widely hailed as a standard or the educatedlayperson, is part o that tradition.

For more inormation, please contact:

Mark HalleVice President, Strategy International Institute or Sustainable DevelopmentMIE, 9 chemin de Balexert

1219 Chatelaine, Genevael.: + 41 (22) 917 84 91Fax: + 41 (22) 917 80 54Email: [email protected]://www.iisd.org/trade

mailto:mhalle%40iisd.ca?subject=http://www.iisd.org/tradehttp://www.iisd.org/trademailto:mhalle%40iisd.ca?subject=


7/164

vi

Preface

Tis handbook aims to oster a better understanding o the interlinkages betweeninternational trade, the environment and the green economy. It thereore ocuseson national and international trade policy and rules, on environmental governanceand principles, and the relationship between both.

Tis third edition o Environment and rade: A Handbook covers a wealth o newinormation, including the emergence o the green economy concept, the latestWO jurisprudence, and increasingly important legal and policy linkages betweentrade and green economy policies and practices in the changing dynamics ointernational trade with the emergence o the BRIC economies and the exponential

rise in preerential trade agreements. Te handbook has been renamed rade andGreen Economy: A Handbook to reflect the green economy as an important toolor achieving sustainable development and poverty eradication, and to illustratethe holistic approach that is required when addressing issues at the nexus o trade,environment and sustainable development.

Te targeted audience includes those interested in and with some knowledge otrade, environment or development, but who are not expert on the intersectiono the three. It should serve as a practical reerence tool or policy-makers andpractitioners, and be equally useul to civil society. With this in mind, the handbookuses clear language and a minimum o jargon to oster a greater understanding byall segments o the public.

Te handbook is available online at www.unep.org/greeneconomy and www.iisd.org/trade/handbook .


http://www.unep.org/greeneconomyhttp://www.iisd.org/trade/handbookhttp://www.iisd.org/trade/handbookhttp://www.iisd.org/trade/handbookhttp://www.iisd.org/trade/handbookhttp://www.unep.org/greeneconomy


8/164

vii

Acknowledgements

Tis handbook is the product o many hands. Since its first edition in 2000 it hasbenefited rom many expert contributions and reviews. Aaron Cosbey rom IISDand Anja von Moltke rom UNEP’s Economic and rade Branch managed thisproject with support rom Liesbeth Casier.

Lead authors were Aaron Cosbey, Kati Kulovesi, Liesbeth Casier and Anja von Moltke. Contributing authors were Giles Chappell, Ivetta Gerasimchuk,Alexander Kasterine, Lennart Kuntze, John Maughan, Fabrizio Meliado, JoachimMonkelbaan, Katarina Nossal, Ralph Osterwoldt, Katharina Schmidt andBenjamin Smith.

We would like to thank Mari Chijiiwa or the design and layout o the book, andEve Rickert or managing the process o copy-editing, design and layout. DamonVis-Dunbar and Myriam Schmidt o IISD acted, respectively, as project managerand project accountant.

Sincere thanks are due to a number o generous and capable reviewers. Teseinclude Harro van Asselt, Claudia Assmann, Christopher Beaton, NathalieBernasconi-Osterwalder, Melanie Cormier-Klein, Carlos Correa, ChristianeGerstetter, Daniele Gerundino, Arunabha Ghosh, Julie Godin, Peter Govindasamy,

Mark Halle, Ulrich Hoffmann, imo Koivurova, Raael Leal-Arcas, Sheila Logan,Gabrielle Marceau, Gracia Marin-Duran, Roger Martini, Petros Mavroidis, ElisaMorgera, Ralph Osterwoldt, Pierre Quiblier, Luca Rubini, Sheng Fulai, DiegoSilva, Benjamin Simmons, Fredric Stany, Ronald Steenblik, Mahesh Sugathan, anDing-Yong, Jorge Viñuales David Vivas Eugui and Marceil Yeater.

While the help o the various reviewers was invaluable in shaping this book,responsibility or any errors in the final product is borne entirely by the authors atUNEP and IISD.

We would also like to acknowledge the financial contributions o the DeutscheGesellschaf ür Internationale Zusammenarbeit (GIZ); New Zealand’s Ministryo Foreign Affairs and Ministry o Environment; Canada’s Department o ForeignAffairs, rade and Development; and the International rade Center (IC), whichhave made the publication o this third edition possible.



9/164

viii

Foreword

Te expansion and liberalization o global trade, while a primary driver oeconomic growth, should not come at the expense o the natural environment.

In 2013, the financial volume o global trade amounted to US$23.4 trillion, roughlya third o global GDP. At the same time, the world’s environmental indicatorsreveal that the pressure exerted by trade on the environment is taking its toll.

Population growth and rising incomes are uelling a demand or goods and servicesthat is ofen met at the expense o natural resources, especially land and water. Atripling o the global population in the last six decades and a our-old increase inGDP expected by 2050 are just some o the actors driving the growth in trade.Tese trends are pushing a growing number o the world’s ecosystems well beyondtheir service capacity. For example, global demand or ood is expected to doublebetween now and 2050. By this time, an estimated 3.9 billion people, or 40 per cento the projected global population, will live in countries acing water scarcity, withaccess to as little as 1,000 litres o water per person a year.

For these trends to be reversed, trade must be harnessed as a catalyst or positiveeconomic, social and environmental change, rather than a driver o environmentaldegradation. Te green economy presents a model or reversing these trends by

altering economic policies and incentives in a way that supports growth, socialequity and welare through the conservation and sustainable use o naturalresources and vigilant control o pollution.

Tis handbook provides an analysis o the most recent developments inenvironment and trade governance, as well as a discussion o the legal and policylinkages between the two. Building on the previous two editions o the handbook,it supplements UNEP’s Green Economy and rade Opportunities Report byproviding policy-makers, civil servants, academics and students with an easily

accessible analysis o the interplay between environmental and trade policy in thecontext o a green economy.

Te objective o this Handbook is to increase coordination and reduce tensionbetween the international trade and environment agendas. Doing so will allowtrade, one o the most powerul tools or generating wealth, to be leveraged toopen new pathways to achieve sustainable development.

Achim SteinerUnited Nations Under-Secretary GeneralExecutive Director, United Nations Environment Programme



10/164

ix

Foreword

Tis third edition o IISD and UNEP’s popular standard on the intersectiono international trade, the green economy and sustainable development is atestament to the distance we have come since the issues sprang to lie in the early1990s as incendiary debates: the trade-environment “dialogues o the dea.” Forexample, while previous versions o the book eatured what amounted to mutualintroductions to help the trade and environment communities understand eachother’s basic motivations and assumptions, most o those passages are nowobsolete. Tere is today much deeper understanding all around, and distinctly lessmistrust and suspicion.

Tat is not to say that the agenda is straightorward. Over the last decades wehave seen distressingly little progress in the multilateral trade system on issuessuch as climate change, perverse subsidies, sustainable agriculture and a litany oother critically important challenges explored in this volume. At the same time,we have seen welcome advances outside the negotiations, in the context o disputesettlement. And regional trade approaches show some promise or progressoutside the multilateral setting, though they pose their own set o risks. On theenvironment policy side, it has not helped that a number o multilateral agendasare making only difficult progress, unable to articulate clearly what is needed rom

the trading system.Nonetheless, the modern agenda as explored in this handbook is one that looks ormutual support, that asks how the objectives o a healthy economy, social equityand environmental integrity can be met with ew compromises and, ideally, withpositive synergy. Tat is a welcome evolution that this volume, by making complexissues accessible to a broad audience, seeks to deepen and prolong.

Scott VaughanPresident and Chie Executive OfficerInternational Institute or Sustainable Development



11/164


12/164

xi

Table of Contents

Preace . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . viAcknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .viiForeword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . viiiAbbreviations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiiiList o ext Boxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xv 1. Global rends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.1 Environment and rade Linkages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31.2 Te Evolution oward the Green Economy . . . . . . . . . . . . . . . . . . . . . . . . .4 Suggested Readings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .72. International Environmental Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . .82.1 Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102.2 National Environmental Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .122.3 Multilateral Environmental Agreements . . . . . . . . . . . . . . . . . . . . . . . . . .15 Suggested Readings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .283. International rade Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .293.1 Objectives o the WO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .303.2 Structure o the WO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .303.3 Te Core Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .363.4 Te Key Agreements, with Special Consideration o Tose Related to the Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 383.5 Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .563.6 Regional/Preerential rade Agreements . . . . . . . . . . . . . . . . . . . . . . . . . .58 Suggested Readings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .604. Multilateral rade Negotiations – WO & Doha Round . . . . . . . . . . . . . . .614.1 Environment and the WO Doha Mandate . . . . . . . . . . . . . . . . . . . . . . . .614.2 Looking Forward . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .634.3 Te Bali Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64 Suggested Readings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .665. Legal and Policy Linkages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .675.1 Process and Production Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 675.2 Environmental Measures, Competitiveness and Leakage . . . . . . . . . . . .725.3 Voluntary Sustainability Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .755.4 Te WO and MEAs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .805.5 Intellectual Property Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .855.6 Green Industrial Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .935.7 Agriculture and GMOs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .965.8 Subsidies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .985.9 Biouels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1065.10 Sustainable Government Procurement . . . . . . . . . . . . . . . . . . . . . . . . . . .1095.11 Environmental Goods and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1105.12 Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .114 Suggested Readings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119



13/164

xii

6. Regional and Bilateral rade Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . 1236.1 Environmental Provisions in Regional and Bilateral rade Agreements . . 1236.2 Environmental Impact Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1276.3 Environmental Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1286.4 Openness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129 Suggested Readings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1317. Support and Capacity Building or rade in a Green Economy . . . . . . . . 1327.1 Aid or rade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1327.2 rade Facilitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135 Suggested Readings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1378. Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139



14/164

xiii

Abbreviations

AB WO Appellate BodyA Aid or radeAoA WO Agreement on AgricultureAPEC Asia-Pacific Economic CooperationASEAN Association o Southeast Asian NationsBCA border carbon adjustmentBI bilateral investment treatyBRIC Brazil, Russia, India, ChinaCARIFORUM Caribbean Forum o Arican, Caribbean and Pacific StatesCBD Convention on Biological DiversityCBDR common but differentiated responsibility CIES Convention on International rade in Endangered Species o

Wild Fauna and FloraCPC Central Product ClassificationCE Committee on rade and EnvironmentDSB WO Dispute Settlement Body DSU Dispute Settlement UnderstandingECOWAS Economic Community o West Arican StatesEGS environmental goods and servicesES EU Emissions rading SystemFAO Food and Agriculture Organization o the United NationsFDI oreign direct investmentFI eed-in tariffFLO Fairtrade Labelling Organizations InternationalFSC Forest Stewardship CouncilGAS General Agreement on rade in ServicesGA General Agreement on ariffs and radeGHG greenhouse gasGM genetically modifiedGMO genetically modified organismGPA WO Agreement on Government ProcurementICAO International Civil Aviation OrganizationILUC indirect land use changeIPR intellectual property rightISEAL International Social and Environmental Labeling AllianceISO International Organization or StandardizationIPGRFA International reaty on Plant Genetic Resources or Food and

AgricultureLCA lie-cycle analysisLMO living (genetically) modified organismMEA multilateral environmental agreement



15/164


16/164

xv

List of Text Boxes

Box 2.1: Sustainable development according to Brundtland . . . . . . . . . . . . . . . . . .9Box 2.2: Standards versus technical regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . .14Box 2.3: Key MEAs relevant to trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16Box 2.4: rade-related provisions in selected MEAs . . . . . . . . . . . . . . . . . . . . . . . .23Box 2.5: rade and climate change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26Box 3.1: Four phases o the WO dispute settlement proceedings . . . . . . . . . . . .32Box 3.2: Te Marrakesh Mandate or the CE . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34Box 3.3: Te U.S.–Shrimp case . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37Box 3.4: EC–Asbestos (likeness under the GA) . . . . . . . . . . . . . . . . . . . . . . . . . . 41Box 3.5: Export restrictions and environmental exceptions in China–Raw Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43Box 3.6: Article XX(b) o the GA in the Brazil–Retreaded yres dispute . . . .45Box 3.7: Animal welare and public morals: EC–Seal Products . . . . . . . . . . . . . . . 47Box 3.8: ypes o intellectual property rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49Box 3.9: Eco-labelling and the WO: U.S.–una II (Mexico) . . . . . . . . . . . . . . . . 50Box 3.10: GMOs, precaution and scientific uncertainty in SPS matters: EC–Biotech . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2Box 3.11: Precaution and harmonization in the SPS Agreement: EC–Hormones. . .53Box 3.12: WO and green subsidies: Canada–Renewable Energy . . . . . . . . . . . .55Box 5.1: Product- and non-product-related PPMs . . . . . . . . . . . . . . . . . . . . . . . . .68Box 5.2: Te EU Scheme or International Aviation Emissions . . . . . . . . . . . . . . .73Box 5.3: Eco-labels according to the International Organization or Standardization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76Box 5.4: Examples o voluntary standards and eco-labels . . . . . . . . . . . . . . . . . . .77Box 5.5: Te UN Forum on Sustainability Standards . . . . . . . . . . . . . . . . . . . . . . .80Box 5.6: Specific and non-specific commitments in MEAs . . . . . . . . . . . . . . . . . .83Box 5.7: 2009 UN study on UPOV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .92Box 5.8: International trade in electricity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .96Box 5.9: Te three WO agricultural boxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .101Box 7.1: Integrating environment into A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .134



17/164


18/164

1


1. Global Trends

Our world has seen undamental and pervasive change over the last 50 years.National economies are increasingly interconnected in an economic structure o“global value chains,” where all the elements needed to produce a final good orservice—production o inputs, design, assembly, management, marketing, savingsor investment—may be sourced rom around the globe in a system held togetherby powerul communications and inormation technologies. Global value chainsenhance the economic and resource efficiency o production processes, andchallenge the conventional ocus on national competitiveness.

Te trend toward globalization has been driven by multiple actors, including

innovative technologies and reduced barriers to international trade and investmentflows. Te world has seen a steady increase in the importance o internationaltrade in the global economy: since 1980, the global economy has roughly tripledand world trade has grown by a actor o six. By 2011, exports o merchandise andcommercial services reached $22.3 trillion* in value and accounted or 29.3 percent o GDP. For 2013, that share increased to around 32 per cent.

Another important trend is the widening o national and global income gaps; thebenefits o growth have been unevenly spread. oday, the wealthiest 20 per cent othe population earn over 70 per cent o total income, and the growing inequalitywithin nations shows no signs o abating. However, while Gini indices measuringinequality o income have grown the world over, absolute poverty has decreased.Te global real GDP per capita now exceeds $7,500, and between 1990 and 2010the global population living in extreme poverty (i.e., on $1.25 a day) was halved,to 21 per cent.

Te absolute decrease in global poverty has been driven mainly by the globalexpansion o ree trade and the rise o the BRIC (Brazil, Russia, India, China)economies. As an indicator o a reduced development gap, South-South trade has

increased to roughly hal o developing countries’ goods and services exports.Some developing countries are also equalling developed countries in strategically

vital economic indicators, such as renewable energy investment.

However, while rapid economic growth in emerging economies has reducedthe development gap between North and South, world trade patterns show thatleast-developed countries’ contributions to global value chains are still dominatedby natural resource–based products and raw materials. Tis creates an urgent needor economic diversification or these countries to secure long-term growth and

sustainable development.Besides these socioeconomic trends, the world is also experiencing enormousenvironmental change. Te groundbreaking Millennium Ecosystem Assessmentound in 2005 that during the second hal o the 20th century, humans alteredthe world’s ecosystems more undamentally than during any other period in

* All values in USD, unless otherwise stated.


19/164


2

human history, and that some 60 per cent o the world’s ecosystem services arecurrently being degraded or used unsustainably. Since 1971, global carbon dioxideemissions that cause climate change have increased by an annual 2 per cent—117per cent overall—and their growth continues. Evidence is mounting that we havepassed a milestone carbon dioxide concentration o 400 parts per million in theatmosphere. Partly due to climate change and also driven by many other actors,global biodiversity has declined by 30 per cent since 1970, and the current rate ospecies extinction is some 1,000 to 10,000 times higher than the natural extinctionrate. Te steady increase in nitrogen released rom cars and ertilizers is creatingdeserts o lielessness in our oceans and lakes. O remaining global fish resources,about 57 per cent are fished at their biological limit, and 30 per cent beyond thatpoint. I current trends persist, by 2050 an estimated 3.9 billion people, or 40 percent o the projected global population, will live in countries acing water scarcity,having less than 1,000 litres o water per person a year. Each year 3.4 millionpeople, mostly children, die rom diseases caused by lack o access to clean wateror sanitation.

One significant driver o environmental stress is our increasing numbers, whichcontribute to the continuing growth in global greenhouse gas (GHG) emissions:the global population roughly tripled to 7.2 billion between 1950 and 2013,and projections or 2050 have us adding another 2.4 billion—the 1950 world

population again. While that represents a 25 per cent growth in global populationby 2050, global demand or ood, especially meat and dairy products, is expectedto actually double during the same period. Another actor that is expected to pushus toward and beyond planetary boundaries is the projected our-old increase oglobal GDP by 2050.

Parallel to these developments, the institutions or addressing environmentalproblems have also evolved significantly. Since the first major global environmentaltreaty was signed in 1973, 12 others have entered into orce, dealing with such

global issues as ozone depletion, climate change, biodiversity, transport ohazardous waste, and migratory species; over 70 per cent o the world’s countriesare party to all 13 major global environmental treaties. In addition, the largeand complex body o international environmental law includes almost 3,000environmental agreements concluded at the international, regional or bilaterallevel. At the national level, regulators have moved rom traditional “commandand control” solutions to a mixed bag o regulatory and policy tools that includemarket-based incentives such as pollution charges, taxes, emission trading systems,and sector-specific measures like eed-in tariffs (FIs) or preerential pricing

schemes or renewable energy. For select problems—such as stratospheric ozonedepletion, local air quality, waste management and quality o regional rivers—inmany countries the result has been marked by environmental improvement; ormany others, however, the discouraging trends continue.


20/164


3

1.1 Environment and Trade Linkages

Tese environmental and economic trends are not isolated; rather, they areundamentally related. Much environmental damage is due to the increasedscale o global economic activity. International trade constitutes a growingportion o global economic activity, making it an increasingly important drivero environmental change. As economic globalization proceeds and the globalnature o many environmental problems becomes more evident, there is bound tobe riction among the multilateral, national and regional systems o law and policygoverning both.

Tis book aims to shed light on the physical, legal and institutional linkages

between international trade and the environment. wo undamental truths aboutthis relationship should become clear in the process:

• Te links between trade and the environment are multiple, complex andimportant.

• rade liberalization as such is neither good nor bad or the environment.Its effects on the environment depend on the extent to which environmentand trade goals can be made complementary and mutually supportive. Apositive outcome requires appropriate supporting social, economic and

environmental policies at the national and international levels.

At the most basic level, trade and the environment are related because all economicactivity is based on the environment. Natural resources such as metals andminerals, soil, orests, and fisheries are basic inputs to production o any goods,and also provide the energy needed to process them. At the end o the cycle, theenvironment also receives the waste products o economic activity. rade is alsoaffected by the environment in many ways, rom issues related to natural resourcequality, saety and availability to the act that exporters must respond to growing

consumer and regulatory demands or greener goods and services.From another perspective, environment and trade represent two distinct bodieso law and policy. Environmental law is embodied in various multilateralenvironmental agreements (MEAs) and as regional, national and sub-nationalregulations. rade law is embodied in such legal structures as the multilateraltrade agreements under the World rade Organization (WO), and in regionaland bilateral trade agreements. Te structure, goals and principles o these twoareas are the subject o Chapter 2, on the international system o environmentalmanagement, and Chapter 3, on the multilateral system o trade rules.

It is inevitable that these two areas o law and policy will interact. Environmentallaw, both national and international, and environmental policies—such aspromotion o renewable energy, environmental taxation and conservationmeasures—help define how countries will structure their economic activities.


21/164


4

rade law affects the way in which countries design their laws and policies inareas—such as subsidies, technical regulations, investment policy and taxes—thatare integral to environmental policy. Te legal and policy linkages that arise at thenexus o these two spheres are explored in Chapter 4.

Te progress o and prospects or the multilateral trading system are assessed inChapter 5, with some thoughts on the implications or the green economy. radelaw and policy is increasingly more than just what happens at the multilateral level,however, with the explosive growth o regional and bilateral trade and investmentagreements. Chapter 6 explores how these agreements address environment issues.

Finally, some issues are crosscutting in nature. Efforts to build capacity to

participate meaningully in the green economy, or example, take place on anumber o levels, and Chapter 7 looks in some depth at two key avenues or thissort o work: aid or trade and trade acilitation.

1.2 The Evolution Toward the Green Economy

Te recognition o the crosscutting and interdisciplinary nature o environment,trade and development issues is reflected in the traction or a new developmentparadigm: the “green economy.”

Te UN Environment Programme (UNEP) defines a green economy as onethat results in improved human well-being and social equity while significantlyreducing environmental risks and ecological scarcities. Te concept thereorerecognizes the inseparability o the three pillars o sustainable development—social, economic and environmental development—with the aim o osteringtriple-win situations and, where trade-offs are inevitable, o supporting sounddecision making with adequate data and inormation.

At the 2012 UN Conerence on Sustainable Development, commonly knownas the Rio+20 Conerence, the green economy approach was endorsed as animportant tool or sustainable development and poverty eradication. Given theglobal challenges that countries ace, this approach represents an opportunity orthese two goals to permeate all three pillars o sustainable development.

Te green economy responds to global economic, social and financial crises byreallocating natural, social and financial capital into creating benefits or economicdevelopment, social equity and environmental protection. It reflects a paradigmshif toward a holistic approach to valuing nature and the environment, humanwell-being, and economic development.

In recognition o the three pillars o sustainable development, the green economyapplies three overarching metrics or progress. First, it measures the degree oeconomic transormation toward investment and growth in green sectors. Second,it accounts or the ootprint o development by actoring in the extraction and


22/164


5

depletion o resources. Tird, the green economy measures the well-being osociety by actoring in a population’s access to basic resources, education, healthand social security.

UNEP’s Green Economy Report (2011) estimated that allocating up to 2 per cent oglobal GDP until 2050 to jump-start a green transormation o the global economywould generate as much growth and employment as a brown economy, and wouldoutperorm the latter in the medium and long run while also yielding significantenvironmental and social benefits.

Tere are a multitude o approaches that countries can take to move toward a greeneconomy. ools o choice range rom fiscal incentives, such as green subsidies and

carbon taxes, to regulation o resource-intensive sectors and public investment inresearch and development or green innovation.

Tus, a green economy will look different or each country, depending on themeasures that it adopts based on its own national priorities and natural assets.However, these national pathways can be inormed and assisted by an internationalramework o rules, best practices and actors. It is in this capacity that the UNsystem plans to support countries and regions in the global transition to aninclusive green economy.

Te transition to a green economy is inextricably linked with, and cruciallyaffected by, economic activities related to international trade. A green economytransition can create enhanced trade opportunities, or example, by opening newexport markets or environmental goods and services (EGS) and by greeningglobal value chains. For example, the global market in low-carbon and energy-efficient technologies is projected to nearly triple to $2.2 trillion by 2020. Hence,a green economy is increasingly seen as a gateway to new opportunities or trade,growth and sustainable development.

In turn, trade, when accompanied by appropriate regulation, can acilitate thetransition to a green economy by ostering the exchange o environmentallyriendly goods and services. By effectively seizing the benefits o interstatesynergies, international trade can play a key role in the transition to a greeneconomy.

World leaders at the Rio+20 Conerence embraced this notion by defininginternational trade as “an engine or development and sustained economic growth.”While the pre-Rio debate ocused on many developing countries’ concerns aboutthe risks o countries using green economy policies as a pretext or protectionist

measures, it could be argued that Rio+20 broadened the ocus o the trade andgreen economy debate to also consider the opportunities that green economymeasures can bring to developing countries in terms o development, marketcreation and access, employment, and sustainability.


23/164


6

In recognition o the act that environmental issues ofen call or interdisciplinaryand holistic solutions, this handbook aims to describe the broader universe ointerrelated green economy and trade issues.


24/164


7

Suggested Readings

Global trendsOrganisation or Economic Co-operation and Development (OECD).(2012). OECD environmental outlook to 2050: Te consequences ofinaction. www.oecd.org/environment/indicators-modelling-outlooks/oecdenvironmentaloutlookto2050theconsequencesofinaction.htm

Rockström, J., Steffen, W., Noone, K., Persson, Å., Chapin, F.S., Lambin, E.F.,…Foley, J.A. (2009). A sae operating space or humanity. Nature, 461, 472–475.

UNEP. (2012). Global environmental outlook 5: Environment for the future wewant. www.unep.org/geo/geo5.asp

Environment and trade linkages

UNEP. (2013). Green economy and trade — rends, challenges and opportunities.www.unep.org/greeneconomy/Portals/88/GEReport/pd/FullReport.pd

Najam, A., Halle, M., Meléndez-Ortiz, R., Shaw, S., Sell, M., Baumüller, H.,…Cosbey, A. (2007). rade and Environment: A resource book. www.iisd.org/publications/trade-and-environment-resource-book

Evolution toward the green economy

Copeland, B.R. (2012). International trade and green growth (World Bankpolicy research working paper 6235). http://elibrary.worldbank.org/doi/book/10.1596/1813-9450-6235

Cosbey, A. (2011). Are there downsides to a green economy? Te trade,investment and competitiveness implications o unilateral green economicpursuit. In Te road to Rio+20: Te green economy, trade and sustainabledevelopment. www.unctad.org/en/PublicationsLibrary/UNCAD_DIC_ED_2011_3.pd

UNEP. (2011). owards a green economy: Pathways to sustainable developmentand poverty eradication. www.unep.org/greeneconomy/GreenEconomyReport

UNEP. (2014). A guidance manual for green economy policy assessment.http://www.unep.org/greeneconomy/Portals/88/documents/GEI%20Highlights/UNEP%20Assessment%20GE%20Policymaking_or%20web.pd

WO & UNEP. (2009). rade and climate change. WO – UNEP report. http://www.wto.org/english/res_e/booksp_e/trade_climate_change_e.pd

http://www.oecd.org/environment/indicators-modelling-outlooks/oecdenvironmentaloutlookto2050theconsequencesofinaction.htmhttp://www.oecd.org/environment/indicators-modelling-outlooks/oecdenvironmentaloutlookto2050theconsequencesofinaction.htmhttp://www.unep.org/geo/geo5.asphttp://www.unep.org/greeneconomy/Portals/88/GETReport/pdf/FullReport.pdfhttp://www.iisd.org/publications/trade-and-environment-resource-bookhttp://www.iisd.org/publications/trade-and-environment-resource-bookhttp://elibrary.worldbank.org/doi/book/10.1596/1813-9450-6235http://elibrary.worldbank.org/doi/book/10.1596/1813-9450-6235http://www.unctad.org/en/PublicationsLibrary/UNCTAD_DITC_TED_2011_3.pdfhttp://www.unctad.org/en/PublicationsLibrary/UNCTAD_DITC_TED_2011_3.pdfhttp://www.unep.org/greeneconomy/GreenEconomyReporthttp://www.unep.org/greeneconomy/Portals/88/documents/GEI%20Highlights/UNEP%20Assessment%20GE%20Policymaking_for%20web.pdfhttp://www.unep.org/greeneconomy/Portals/88/documents/GEI%20Highlights/UNEP%20Assessment%20GE%20Policymaking_for%20web.pdfhttp://www.wto.org/english/res_e/booksp_e/trade_climate_change_e.pdfhttp://www.wto.org/english/res_e/booksp_e/trade_climate_change_e.pdfhttp://www.wto.org/english/res_e/booksp_e/trade_climate_change_e.pdfhttp://www.wto.org/english/res_e/booksp_e/trade_climate_change_e.pdfhttp://www.unep.org/greeneconomy/Portals/88/documents/GEI%20Highlights/UNEP%20Assessment%20GE%20Policymaking_for%20web.pdfhttp://www.unep.org/greeneconomy/Portals/88/documents/GEI%20Highlights/UNEP%20Assessment%20GE%20Policymaking_for%20web.pdfhttp://www.unep.org/greeneconomy/GreenEconomyReporthttp://www.unctad.org/en/PublicationsLibrary/UNCTAD_DITC_TED_2011_3.pdfhttp://www.unctad.org/en/PublicationsLibrary/UNCTAD_DITC_TED_2011_3.pdfhttp://elibrary.worldbank.org/doi/book/10.1596/1813-9450-6235http://elibrary.worldbank.org/doi/book/10.1596/1813-9450-6235http://www.iisd.org/publications/trade-and-environment-resource-bookhttp://www.iisd.org/publications/trade-and-environment-resource-bookhttp://www.unep.org/greeneconomy/Portals/88/GETReport/pdf/FullReport.pdfhttp://www.unep.org/geo/geo5.asphttp://www.oecd.org/environment/indicators-modelling-outlooks/oecdenvironmentaloutlookto2050theconsequencesofinaction.htmhttp://www.oecd.org/environment/indicators-modelling-outlooks/oecdenvironmentaloutlookto2050theconsequencesofinaction.htm


25/164


8

2. International Environmental Governance

Te modern system o international environmental governance dates to the 1972UN Conerence on the Human Environment, held in Stockholm, Sweden. Severalinternational environmental agreements, in particular on marine pollution,predate the Stockholm Conerence, but this first major environmental eventtriggered a flurry o urther initiatives at national and international levels, ascountries and international organizations responded to the emerging challenges oenvironmental degradation. Te Stockholm Conerence also pioneered new ormso public participation in international governance, establishing links between theormal government-driven negotiating processes and the inormal parallel non-governmental organization (NGO) processes.

Te Stockholm Conerence led to the establishment o UNEP, headquartered inNairobi, Kenya. UNEP was to act as a catalyst or environmental issues in theUnited Nations system, but its means were modest compared with the dimensionso its task. Over the years, however, UNEP has launched a significant number ointernational agreements, and today has administrative responsibility or severalmajor conventions as well as many regional agreements. Perhaps even moreimportantly, it has also acted as the tireless environmental conscience and voiceor the United Nations system.

It soon became obvious that the Stockholm Conerence’s ocus on the environmentwithout due concern or development was not enough or the long-termadvancement o the international environmental agenda. In 1985 the UnitedNations established the World Commission on Environment and Development,which issued its report, Our Common Future, in 1987. Tis report was the firstsystematic articulation o the concept o sustainable development (see Box 2.1).Tis, in turn, became the basis or a major review o all international environmentalactivities in the United Nations through the UN Conerence on Environment andDevelopment, held in 1992 in Rio de Janeiro, Brazil.

Te 1992 Rio Conerence articulated an ambitious program o sustainabledevelopment, contained in the final conerence documents: the Rio Declarationand the action plan known as Agenda 21. Te preparations or the Rio Conerencealso provided the momentum or the conclusion o the UN Framework Conventionon Climate Change (UNFCCC) and the Convention on Biological Diversity(CBD), which were opened or signature at the Conerence. Te Rio Conerencealso helped establish the UN Commission on Sustainable Development, whichoperated or 20 years beore being replaced by the High-level Political Forum on

sustainable development in 2013. Te first Rio Conerence affirmed the role othe Global Environment Facility, thus widening the organizational basis or theenvironment and sustainable development within the United Nations system.


26/164


9

Box 2.1: Sustainable development according to

Brundtland

Sustainable development goes urther than just concern or the environment. Itaims to improve human conditions, but seeks to achieve this in an environmentallysustainable way. According to the Brundtland Commission report, Our CommonFuture, sustainable development is “Development that meets the needs o thepresent without compromising the ability o uture generations to meet their ownneeds.”

Further, it contains within it two key concepts:

• Te concept o “needs,” in particular the essential needs o the world’spoor, to which overriding priority should be given.

• Te notion that the state o our technology and our systems o socialorganization (how our societies organize and govern, how we cooperateat the international level, etc.) impose limitations on the environment’sability to meet present and uture needs.

In 2012, the Rio+20 ollow-up conerence was held. Its objective was to renewpolitical commitment or sustainable development. Te conerence also sought toassess implementation and address new and emerging issues. Te Rio+20 outcomedocument, Te Future We Want, ocuses on the green economy, institutions andimplementation. It recognizes the green economy, in the context o sustainabledevelopment and poverty eradication, as one o the most important tools orachieving sustainable development and calls or assistance or countries seekingto transition to greener economies. Te Rio+20 outcome also calls or strongerinternational cooperation on finance, debt, trade and technology. Tis includesbetter cooperation among institutions within the United Nations system, and withthe WO. Rio+20 recognizes international trade as an engine or development andsustained economic growth, and calls or progress on trade-distorting subsidiesand trade in EGS. Furthermore, it launches a process to speciy sustainabledevelopment goals or the post-2015 period.

Te complex webs o institutions and organizations evolving around internationalenvironmental agreements are ofen reerred to as “regimes,” to distinguish themrom state-to-state treaties cast in stone. For one thing, they involve a range onon-state actors; the Convention on International rade in Endangered Species

o Wild Fauna and Flora (CIES), or example, relies undamentally on an NGO(RAFFIC) to monitor and collect inormation on endangered species, and theprocess o negotiations in the UNFCCC is heavily influenced by non-state actors(environmental NGOs, research NGOs, business NGOs, labour, social justicegroups, etc.), who speak and make ormal submissions during negotiations.


27/164


10

For another thing, they involve both hard and sof law. For example, one o thekey components o the Montreal Protocol, which addresses ozone depletion, isa acility that identifies technological alternatives and helps support developingcountries in transitioning to using them. Finally, they are constantly evolvingin response to our increasing understanding o the science and the trends thataffect their subject areas. Te regimes or chemical management and endangeredspecies, or example, work on an ongoing basis to update the lists o chemicals andspecies covered and the nature o the coverage as circumstances and understandingchange. And the climate regime’s negotiations are underpinned by one o the mostextensive ongoing scientific and economic advisory pursuits ever conducted: theIntergovernmental Panel on Climate Change.

2.1 Principles

Te structure o international environmental regimes must reflect the structureo the problem being addressed. A regime that protects biodiversity needsto use different tools, draw on different constituencies and have differentinstitutional arrangements than one that protects the oceans rom oil pollution,or one that manages international trade in endangered species. Nevertheless,

most environmental regimes have come to respect several undamental principlesand approaches, and to articulate them. Many o these were laid out in the 1992Rio Declaration on Environment and Development. Eight key principles andapproaches are described below.

Prevention. Te principle o prevention has two elements: each state has thesovereign right to exploit its natural resources pursuant to its own environmentaland development policies and, as well, has a responsibility to ensure that activitieswithin its jurisdiction or control do not cause damage to the environment o otherstates or in areas that are beyond states’ national jurisdiction, such as the high seas.Te principle entails that states are responsible not only or their own activities, butor all public and private activities within their jurisdictions or under their control.Te principle prohibiting transboundary harm, widely known as the no-harmprinciple o the 1972 Stockholm Declaration, is included in the Rio Declarationand many environmental treaties. Te principle o prevention has been recognizedby the International Court o Justice as customary international law (Legality ofNuclear Weapons, 1996).

Integration. Te Rio Declaration’s Principle 4 reads: “In order to achieve sustainable

development, environmental protection shall constitute an integral part o thedevelopment process and cannot be considered in isolation rom it.” Tis is akey principle o international environmental governance and is operationalizedin all the major global treaties by means o mechanisms that try to ensure thatenvironmental protection does not come at the expense o development. It is


28/164


11

also operationalized in the trade regime and has ound expression in a numbero environment-related disputes (or example, U.S.–Shrimp; see Box 3.3). Teintegration principle is the legal ace o sustainable development.

Assessment of environmental impacts. In recent years, the internationalcommunity has recognized that international law requires countries to assessenvironmental impacts when planning activities that can have significant adverseimpacts across borders. Tis is particularly important when the planned activityaffects a resource shared between countries, as noted by the International Courto Justice in its 2010 Pulp Mills decision confirming this principle. (In that case,the court dealt with the permitting and construction o polluting pulp millson the River Uruguay, which is bordered by both Uruguay and Argentina.)

Environmental impact assessment is a tool to integrate sustainable developmentconsiderations into projects and activities, and also a mechanism or the publicto get inormation and participate in decision making. While the UN EconomicCommission or Europe Convention on Environmental Impact Assessment in aransboundary Context provides basic guidance on how to assess environmentalimpacts in the international context, it still remains unclear how to ulfil this legalobligation in practice. Tis is particularly true o how to appropriately engage theaffected public—an exercise that can run the spectrum rom merely inorming, toconsulting, to allowing or meaningul participation.

Precaution. Calculating the likelihood and cost o damage is a difficult task,because our knowledge o ecological and environmental processes is requentlyrudimentary at best and is based on an evolving oundation o scientific research.Despite increasing availability o scientific, reliable and internationally acceptedinormation (through processes such as the Intergovernmental Panel on ClimateChange and the Intergovernmental Panel on Biodiversity and EcosystemServices), science does not always provide clear guidance on the measures thatmay be needed, so we are ofen aced with the task o making policy in the ace

o uncertainty. As articulated in the 1992 Rio Declaration, the lack o conclusivescientific evidence does not justiy inaction, particularly when the consequenceso inaction may be serious or irreversible, or when the costs o action are low.Te Seabed Disputes Chamber o the International ribunal or the Law o theSea recognized in its 2011 opinion on “activities in the area” that precaution is acomponent o due diligence and thus an extension o prevention. Te possibilityo precautionary action is also included in some WO provisions, such as Article5.7 o the Agreement on the Application o Sanitary and Phytosanitary Measures(SPS Agreement) (see Section 3.4.6 on the SPS Agreement, Box 3.11 on the EC–

Hormones case and Box 3.10 on the EC–Biotech case).Openness. Openness has two elements: transparency and public participation inpolicy making. Both are necessary or good environmental management, becauseprotecting the environment requires the participation o countless people in manylocations. At the international level most environmental regimes are relatively


29/164


12

open, making use o environmental organizations, the media and the Internetto communicate to the public, with many allowing NGOs to participate in thediscussions and negotiations o their provisions. But at the national level, practice

varies widely. While openness is not a legal principle, there is an environmentalagreement designed to promote openness in environmental governance: the 1998Aarhus Convention on Access to Inormation, Public Participation in Decision-Making and Access to Justice in Environmental Matters.

Polluter-pays principle. Te polluter-pays principle was first propounded bythe OECD—the “policy club” o industrialized countries—in 1972. At thattime it simply said that polluters should have to bear the ull cost o meetingenvironmental regulations, and that no subsidies should be given to help in this

process. It has since evolved to become a broader principle o cost internalization:polluters should pay the ull cost o the environmental damage that their activitiesproduce. O course, much o that cost will be passed along to consumers in theprice o the goods involved, but this then discourages consumption o morepollution-intensive goods.

Common but differentiated responsibilities (CBDRs). Many environmentalregimes require the participation o numerous countries, both rich and poor. Butnot all countries carry an equal responsibility or past environmental damage,

and different countries have different resources at their disposal. So, while theparties to environmental regimes all acknowledge common responsibility orthe environment, they also work to develop differentiated responsibilities oraddressing environmental problems. In the Kyoto Protocol’s first commitmentperiod (2008–2012), or example, only developed country parties had bindingtargets or GHG emission reductions.

Subsidiarity. Te linkages between individuals and the global consequenceso their actions are a major challenge to the organization o environmentalmanagement. In particular, it means that rules developed at one level—or

example in international regimes—must be adapted to conditions in a wide varietyo regional or local environments. Te principle o subsidiarity calls or decisionmaking and responsibility to all to the lowest level o government or politicalorganization that can effectively take action.

2.2 National Environmental Measures

At the country level, the environmental principles discussed above areimplemented through a variety o means. At the base o most national measures,

and o the greatest relevance to the environment-trade interace, are environmentalmeasures—particularly those imposed on traded goods. Tere are many typeso environmental measures applicable along the lietime o a product, romextraction o raw materials to manuacture, packaging, transport, trade, sale, useand disposal. Examples o environmental measures include the ollowing:


30/164


13

• Species and habitat conservation measures

• Restrictions on certain goods and practices, including bans, standards

and permit requirements• Environmental taxes and charges

• Negotiated voluntary agreements

• Deposit-and-reund, or take-back, schemes

National environmental measures can be grouped under six headings.

Environmental quality regulations seek to describe a desired state o the

environment. Tey can be specified in terms o an acceptable status or air or waterquality, or in terms o maximum concentrations o specific pollutants in the air,water or soil. A modern approach to such regulations, which is responsive to theaccumulation o harmul substances in the natural environment, is the concepto “critical loads”: levels o deposition o pollutants below which some elementso the environment are not damaged. Environmental quality regulations can alsotake the orm o population-based measures requiring the protection o certainspecies that have become threatened or endangered.

Emission standards identiy the amount o certain substances a acility mayemit. Ofen they are dynamic regulations, requiring the use o the best availabletechnology. Emission standards can induce significant changes in productionprocesses, since it is generally less costly to avoid producing pollutants than tocapture them at the end o the production process, creating a waste stream thatmust in turn be managed.

Environmental product standards or technical regulations speciy certainproduct characteristics that are deemed necessary to avoid environmental harmrom use or disposal. For example, the use o lead in household paints has been

banned in most countries because some o that toxic heavy metal is likely to reachthe environment and pose a hazard, and many countries mandate standards oefficiency in appliances and other consumer goods because, among other things,low efficiencies contribute to climate change through wasteul use o energy.

Standards or technical regulations based on processes and production methods(PPMs) speciy how products are to be produced and what kinds o impact theymay have on the environment. echnical regulations based on PPMs take onsignificance in international trade that they completely lack at the domestic level.

Applied to traded goods, they have been accused o amounting to the importingcountry regulating activities that take place outside its borders. O course product -based technical regulations may also orce changes in oreign processes andproduction methods. Te trade implications o PPM-based technical regulationsare examined urther in Section 5.1.


31/164


14

Performance-based regulations are a type o PPM-based standard, but they donot ocus on the process o actual production. Tey require certain actions, suchas environmental assessments, which are expected to improve environmentaloutcomes. Environmental management standards, or example, dictate a structureo firm management that is conducive to adequately addressing environmentalconcerns, spelling out reporting standards, mandating an objective o continuousimprovement and so on.

Market-based instruments, like the regulatory measures described above, seekto achieve some desired outcome that improves or protects the environment.However, they do so not by speciying the behaviour o producers or the outcomeso production. Rather, they lay down incentives and disincentives that will

hopeully achieve similar results. Rather than setting ambient pollution limits, orexample, they may assess a charge per unit o pollution emitted. Common typeso market-based instruments are taxes, charges, tradable permits and subsidies.Te advantage o these instruments is that they are generally more economicallyefficient. Teir drawback is that, like regulatory measures, they require preciselyarticulated environmental goals, as well as monitoring, to ensure that the desiredresults are being achieved.

Box 2.2: Standards versus technical regulations

In trade law, technical regulations are documents that lay out mandatory ruleson product characteristics, the way a product is made, or the product’s packagingor labelling. Tey are put into law and implemented by governments. Examplesinclude mandatory health warnings on cigarette packages and minimumautomobile efficiency levels. raditionally, “mandatory” described guidelinesthat products had to ollow to be allowed or sale, distribution or import in a

jurisdiction (though that understanding is no longer so clear-cut; see Box 3.9).

Standards also describe product characteristics or the way a product is made,but, by contrast, these are voluntary. Examples include air trade standards andguidelines or where governments should set their saety standards or consumerproducts. Te latter are typically agreed at the international level in bodies such asthe International Organization or Standardization (ISO), and ofen then becomethe basis or national technical regulations.

While in ordinary use both such measures may be called “standards,” it is importantto distinguish between the two, since they are treated quite differently under trade

law.


32/164


15

It is possible to combine many o these measurements and standards whenanalyzing the ull impact o a single product—to consider all the environmentalimpacts o a product’s production, use and disposal, and to combine them in asingle lie-cycle analysis (LCA). While not part o the regulatory toolbox per se,LCAs can be used to identiy opportunities to reduce environmental impacts.Tey can also be used to compare the environmental impacts o otherwise “like”products—or example, cloth diapers and disposable diapers, or different kinds obeverage containers. LCAs by definition look at a large number o categories oenvironmental impacts—or example, water and energy use, or release o variouspollutants. Te challenge in comparing the lie-cycle impacts o different productslies in adding up the various types o impacts—or example, how to add waterpollution figures to biodiversity damage figures—and deciding how to weightthem to calculate an overall measure o environmental impact.

Tis large number and variety o measures, usually used in combination ratherthan alone, create a complex management structure in which each measurecomplements the other, and ew i any are effective just by themselves. It isimportant to recognize, however, that all o these measures, both regulatory andmarket-based, result in structural economic change as environmentally desirableactivities are avoured and environmentally undesirable ones disadvantaged. In anopen economy this probably means altering the flows o traded goods, creating

potential problems or the trading system, which has traditionally dealt mostlywith product-based technical regulations and standards.

2.3 Multilateral Environmental Agreements

Since the 1972 Stockholm Conerence, an extraordinary number o internationalenvironmental agreements have been concluded. More than 1,000 multilateralenvironmental agreements (MEAs)—defined in this book as those involving morethan two countries—are known to exist. A ew o these are global treaties, open

to any country. Te number o bilateral agreements is over 1,500. Te result is aninternational structure or environmental governance that is diverse and reflectsthe extraordinary range o issues and interests involved.

Very ew MEAs actually regulate trade or mandate the use o trade restrictions. Othe 20 or so that do, even ewer are o notable significance to the environment-tradeinterace, as their measures do not substantially affect trade flows, or the value othe trade flows they do affect is not significant in global terms. Ultimately, themajor interactions between MEAs and trade will not come rom MEA-mandatedtrade-related environmental measures, but rather rom the types o structural andsocial changes these agreements will bring about i they are successul. As notedbelow, ulfilling the UNFCCC commitments will necessarily imply undamentallychanging global patterns o production and consumption.

MEAs that are particularly relevant to trade are discussed in greater detail below.


33/164


16

Box 2.3: Key MEAs relevant to trade

• Convention on International rade in Endangered Species o Wild

Fauna and Flora (CIES), 1973

• Vienna Convention or the Protection o the Ozone Layer, 1985

▷ Montreal Protocol on Substances that Deplete the StratosphericOzone Layer, 1987

• Basel Convention on the Control o ransboundary Movement oHazardous Wastes and their Disposal, 1992

• Convention on Biological Diversity (CBD), 1992

▷ Cartagena Protocol on Biosaety, 2000

▷ Nagoya–Kuala Lumpur Supplementary Protocol on Liability andRedress, 2010

▷ Nagoya Protocol on Access to Genetic Resources and EquitableSharing o Benefits Arising rom their Utilization to the Conventionon Biological Diversity, 2010

• UN Framework Convention on Climate Change, 1992▷ Kyoto Protocol to the UN Framework Convention on Climate

Change, 1997

• Rotterdam Convention on the Prior Inormed Consent Procedure orCertain Hazardous Chemicals and Pesticides in International rade,1998

• Stockholm Convention on Persistent Organic Pollutants, 2001

• Minamata Convention on Mercury, 2013

Dates reer to the completion o negotiations, not entry into orce. Te MinamataConvention on Mercury, the Nagoya Protocol on Access and Benefit-sharing andthe Nagoya–Kuala Lumpur Supplementary Protocol on Liability and Redress arenot yet in orce. All other treaties listed have entered into orce.

Te international structure o environmental governance is extremely dynamic.

Te various regimes address a wide variety o issues, ranging rom toxic substancesto endangered species, rom air pollution to biodiversity. As well, they mustrespond to changing scientific inormation about the environment, changingperceptions o the significance o this inormation, and the constant eedback romthe successes and ailures o the measures adopted in support o their objectives.


34/164


17

2.3.1 The Key Trade-Related MEAs

Tis handbook defines MEAs as those agreements with more than two parties—that is, multilateral is anything bigger than bilateral. Te word multilateral hasa slightly different meaning or the trade community, or whom the multilateraltrading system is the global trading system. Below are the MEAs that areparticularly relevant to trade regimes because they directly control trade as a parto their operation and/or because they will significantly influence trade flows as aresult achieving their objectives. Te data on numbers o parties are current as oJuly 2014.

Te Convention on International rade in Endangered Species of Wild

Fauna and Flora (CIES). Te earliest o the key MEAs, CIES was drawn upin 1973 and entered into orce two years later. CIES seeks to regulate trade incertain species and their parts, as well as products made rom such species. Treeannexes list species identified by the Conerence o Parties (on scientific advice)as requiring various degrees o trade restrictions to ensure their sustainability.Tese restrictions range rom a general prohibition on commercial trade to apartial licensing system. CIES has long been known or the unusually activeparticipation o NGOs, scientific and advocacy organizations in particular, in itsdeliberations. It has subsequently begun—not without controversy—to address

species traded in such volumes as to have a significant economic value, such ascertain tree and fish species. (178 parties.)

Te Vienna Convention for Protection of the Stratosphere and the MontrealProtocol on Substances that Deplete the Stratospheric Ozone Layer. TeVienna Convention was concluded in 1985, at which time ozone depletion wassuspected but not yet confirmed. It provided or research and cooperation to betterunderstand the issue and ormed a ramework agreement under which specificprotocols could be negotiated as needed. Te evidence soon became stronger, and in1987 the parties drafed the Montreal Protocol, establishing a regime o control orseveral classes o industrial chemicals now known to harm the stratospheric ozonelayer. Te Protocol has been amended our times to tighten controls. Te resulthas been a ban on the production and use o several industrial chemicals, togetherwith severe limitations on others. It has successully implemented a precautionaryapproach, by acting beore the availability o clear scientific evidence, and hasalso operationalized the principle o common and differentiated responsibility byestablishing a und to assist developing countries in their transition away romthe use o controlled substances. Its principal implementation tool—apart romcontinuing public pressure—is the control o production and trade o ozone-depleting substances and trade in products containing controlled substances.Te Montreal Protocol included the possibility o imposing controls on trade inproducts produced with (but not containing) controlled substances, but the parties


35/164


18

have not considered it necessary to implement such controls. (Vienna Convention:197 parties; Montreal Protocol: 197 parties.)

Te Convention on Biological Diversity (CBD), the Cartagena Protocolon Biosafety, and the Nagoya Protocol on Access to Genetic Resources andEquitable Sharing of Benefits Arising from their Utilization to the Conventionon Biological Diversity. Opened or signature at the 1992 Rio Conerence,the CBD’s objective is conserving biological diversity, the sustainable use o itscomponents and the air and equitable sharing o the benefits arising rom theuse o genetic resources. Te Convention has resulted in national biodiversitystrategies and action plans in 178 countries. It has also produced two protocols:the Cartagena Protocol on Biosaety and the Nagoya Protocol on Access and

Benefit-Sharing, discussed below. Te CBD plays a major role in highlighting theimportance o biodiversity issues globally, through research and public education.Linkages connecting the CBD regime with agriculture and the WO Agreementon rade-Related Aspects o Intellectual Property Rights (RIPS) are discussed inSections 4.5.1 and 4.5.2. (193 parties, 1 signatory not ratified.)

Te Cartagena Protocol is the first protocol to the CBD, covering trade in mostorms o living (genetically) modified organisms (LMOs) and the risks it maypresent to biodiversity. It creates an advanced inormed agreement system or

LMOs destined to be introduced to the environment (such as micro-organismsand seeds), and a less complex system or monitoring those destined or use asood, animal eed or processing. It sets out a procedure or countries to decidewhether to restrict imports o LMOs, spelling out, or example, the type o riskassessment that must be carried out. In allowing such decisions to be takeneven where the risks are unknown, the Cartagena Protocol operationalizes theprecautionary approach. Te Cartagena Protocol’s provisions have subsequentlybeen complemented with the Nagoya–Kuala Lumpur Supplementary Protocolon Liability and Redress. Tis instrument contains international rules on liability

and redress or damage to biodiversity resulting rom LMOs. (Cartagena Protocol:166 parties; Nagoya–Kuala Lumpur Supplementary Protocol: 30 signatories, 24ratifications. Will enter into orce on the 90th day afer receiving 40 ratifications.)

Te CBD’s Nagoya Protocol ocuses on air and equitable sharing o benefits withcountries and local communities when genetic materials and associated traditionalknowledge are being used in transboundary situations. Te trade dimensioncomes rom the Nagoya Protocol’s relationship with the WO RIPS Agreement,discussed in Section 5.5.1. (92 signatories, 38 ratifications. Will enter into orce onthe 90th day afer receiving 50 ratifications.)

Te UNFCCC and the Kyoto Protocol. Te UNFCCC, adopted at the RioConerence in 1992, grapples with one o the most complex o all environmentalissues, and the one with greatest potential or economic impacts: it aims to reducethe emission o various GHGs (such as carbon dioxide or methane) that contribute


36/164


19

to global climate change. Since such emissions can rarely be limited with technical,“end-o-pipe” technologies, the principal strategy o the UNFCCC must be tochange the patterns o uture production, consumption and investment in avouro activities that emit ewer GHGs.

In December 1997 the Kyoto Protocol was adopted, entering into orce in February2005. Te agreement was structured around two categories o countries: those withGHG limitation commitments (industrialized countries) and those without. TeProtocol’s first set o targets to limit GHG emissions applied in 2008–2012, andthe second set o commitments will apply in 2013–2020. Te challenge with theProtocol is that it only covers a decreasing proportion o global GHG emissions,since the United States never joined the Protocol, and several other industrialized

countries have chosen not to undertake commitments in the new 2013–2020period. Meanwhile, a number o countries—developed and developing—notcovered by the Kyoto Protocol’s targets have set domestic goals and policies to limittheir GHG emissions. Most o these countries have communicated inormation ontheir domestic goals to the UNFCCC.

aken together, the Kyoto Protocol’s binding targets and UNFCCC parties’ nationalmitigation pledges cover the majority o global GHG emissions, although theyare not adequate to prevent dangerous climate change. Negotiations are thereore

ongoing concerning a new legal instrument that would apply rom 2020 and coverall countries party to the UNFCCC.

Enhancing technology transer toward developing countries is an integral parto the UNFCCC, as stated in its Article 4. In particular, the 16th session o itsConerence o the Parties in 2010 established a echnology Mechanism, whichincludes a echnology Executive Committee, as well as a Climate echnology Centreand Network. Te Centre aims to stimulate technology cooperation and enhancethe development and transer o climate-sound technologies that support climatechange mitigation and adaptation. Finance is another increasingly important area

o international climate change cooperation. Te 16th Conerence o the Partiesalso established the Green Climate Fund with the objective o making a significantand ambitious contribution to global efforts to address climate change. Te Fundwill seek to promote a paradigm shif toward a low-emission and climate-resilientdevelopment.

Although neither the UNFCCC nor the Kyoto Protocol specifically mandatesthat parties take trade-restrictive measures, it is highly likely that those parties,in limiting their GHG emissions, will adopt domestic policies and measures

with significant trade implications. Tat likelihood was probably in the mindso drafers when they crafed UNFCCC Article 3.5, which commits the partiesto promoting an “open economic system” that enables developing countries inparticular to address climate change, and which adds language adapted rom theGeneral Agreement on ariffs and rade (GA) Article XX: “Measures taken to


37/164


20

combat climate change, including unilateral ones, should not constitute a means oarbitrary or unjustifiable discrimination or a disguised restriction on internationaltrade.” Further, the Kyoto Protocol’s Articles 2.3 and 3.14 commit developedcountry parties to mitigating climate change in such a way as to minimize adverseimpacts on developing countries—specifically reerring to the sort o impacts thatmight come rom environmental measures that restrict trade. (UNFCCC: 195parties; Kyoto Protocol: 192 parties. Te Kyoto Protocol was amended in 2012 ora second commitment period. For this Doha Amendment to enter into orce, 144ratifications will be required. As o March 2014, 7 parties had ratified the DohaAmendment.)

Te three MEAs described below—the Basel Convention, Rotterdam Convention

and POPs Convention—share the common objective o protecting humanhealth and the environment rom hazardous chemicals and wastes. Teir partiesare increasingly seeking to exploit synergies by enhancing cooperation andcoordination.

Basel Convention on the Control of ransboundary Movement of HazardousWastes and their Disposal. Te Basel Convention resulted rom the concern odeveloping countries, particularly in Arica, that they could become the dumpingground or hazardous wastes whose disposal in the developed world had become

difficult and expensive. Developing countries and NGOs have played a significantrole in the regime since its inception. Discussions within the regime have beenmarked by disputes over the most appropriate strategy or controlling themovement o hazardous waste (regional bans versus prior inormed consent) andthe technical difficulty in establishing unambiguous distinctions between wastesand materials or recycling. In 1995, parties adopted an amendment banning theexport o hazardous waste rom mainly OECD to non-OECD countries. Whilethe Ban Amendment is yet to enter into orce, parties agreed, in 2011, on aninterpretation o the Basel Convention that will expedite this entry. Parties have

also adopted a protocol on liability and compensation, which is not yet in orce.Numerous countries currently adhere to these two instruments, even though theyare not yet in orce. Not content to wait or the Ban Amendment to enter intoorce, and alarmed at several high-profile cases o illicit hazardous waste exportsto Arica rom developed countries, the Organization o Arican Unity convenednegotiations on the Bamako Convention, a 1991 treaty under which 24 partieshave outright banned the import o hazardous waste. Contemporary challengesunder the Basel Convention include illegal trade in hazardous waste, capacity toensure environmentally sound management and increasing waste trade among

developing countries. (180 parties.)Rotterdam Convention on the Prior Informed Consent (PIC) Procedure forCertain Hazardous Chemicals and Pesticides in International rade. TeRotterdam Convention is designed to help countries monitor and control trade incertain hazardous chemicals. Many domestically banned or severely limited goods


38/164


21

are traded internationally. For years there was controversy over the procedures toensure that the appropriate authorities in the importing country were inormedpromptly. Indeed, a working group o the GA (the predecessor o the WO)devoted several years o negotiation to this topic, without achieving a generallyacceptable result. UNEP (concerned with the management o potentially toxicsubstances) and the Food and Agriculture Organization o the United Nations(FAO) (concerned with pesticide use) had a strong interest in developing auniorm system o notification. Te PIC regime under the Rotterdam Conventionoffers assurance that inormation will be provided quickly, and that it will reachthe appropriate authorities when needed. Te Convention also creates a systemthat allows developing countries to stop the import o certain substances i theyeel a need to do so. Also, exporting countries are required to ensure that chemicalssubject to the PIC regime are not traded contrary to the importing party’s decision.(154 parties.)

Stockholm Convention on Persistent Organic Pollutants (POPs). Te POPsConvention entered into orce in May 2004. It establishes an internationalregime or the control o certain substances that persist in the environmentand can accumulate in the ood chain, all o which are suspected o disruptinghormonal unctions in animals and humans (such chemicals are known asendocrine disruptors). Te controlled substances are listed in three annexes:

Annex A envisages elimination o 18 chemicals or classes o chemicals (subject totime-limited exceptions); Annex B imposes restrictions on the listed chemicals,including DD; and Annex C deals with the unintentional releases o certainchemicals. Te POPs Convention also establishes a procedure or adding to theseannexes, which has been used twice. In 2009, the three annexes were amended toinclude nine new POPs. In 2011, Annex A was amended to list endosulan and itsrelated isomers with a specific exemption. (179 parties.)

Minamata Convention on Mercury. Finalized in 2013, the Minamata Convention

is the most recent MEA adopted. It was signed in Minamata, Japan, where anumber o people were exposed to severe mercury poisoning and developed aneurological disease known as the Minamata disease. Te Convention’s objectiveis to protect human health and the environment rom emissions and releases omercury and mercury compounds. Te Convention requires countries to phaseout or take measures to reduce mercury use in certain products, such as batteries,switches, lights, cosmetics, pesticides and measuring devices, and reduce the useo mercury in dental amalgam. Countries are also required to phase out or reducethe use o mercury in manuacturing processes such as chlor-alkali production,

vinyl chloride monomer production and acetaldehyde production. Like theMontreal Protocol, the Minamata Convention leaves room or later amendmentsto its annexes in light o new inormation and technologies. (99 signatories, 1ratification; will enter into orce on the 90th day afer receiving 50 ratifications.)


39/164


22

Forests under international environmental law. Several other internationalenvironmental regimes are still being negotiated, some o which are likely toremain based on a less ormal understanding between the interested parties. Oneo these, the international orest regime, remains controversial and is not ullyarticulated; most observers doubt that it will coalesce into a multilateral agreementin the near uture. Tere are, however, significant orest-related initiatives underMEAs, including negotiations under the UNFCCC to develop a new mechanismknown as REDD+, which aims to reduce deorestation and orest degradation indeveloping countries. Countries also cooperate bilaterally, or example to combattrade in illegally harvested timber through a system o voluntary partnershipagreeme

Trade Ge Handbook

Documents

Transcript of Trade Ge Handbook