Trade & Environment (WTO & GATT Article XX(b)&(g) Exceptions, On-Going Negotiations)

We have already introduced you in a limited fashion to the WTO and the concept of the multilateral trading system in Unit 8. There are at least three things up in the air more generally, however, in the current overlap between international trade and international environmental law. The outlines of the problem become apparent when you look generally at the trade law jurisprudence below addressed to environmental issues.

1/5 The first is that the overlap between trade and the environment issues remains significant, at the same time as the Trump administration apparently drew a hard line on trade during the past 18-24 months. That means that for the first time in 20+ years, the US is clearly not driving the bus on the trade law front within the WTO (because if it is saying it has withdrawn from the Paris Agreement and wants to get out of various trade obligations, while we are still a WTO member, it is harder then to try to steer trade negotiations, also those with environmental implications). So that as a result, following the disavowal of the Paris Agreement, for better or worse, it seems much more likely that the US may encounter trade issues in conjunction with unilateral environmental actions rather than being able to avoid them in steering actual trade law discussions.

2/5 This may or may not change from a US perspective depending upon who wins the November 2020 elections, with two caveats. The first is that the WTO itself is in something of an uproar since its current Director-General Roberto Azevedo, a Brazilian diplomat, decided to leave office a year early, with the result that candidates to be his successor are currently campaigning themselves, and no one is entirely sure what they are telling member countries behind closed doors while campaigning. The second is that, at least as witnessed by WTO website materials, the WTO has made a visible effort in the past 2-3 years to present itself as being supportive on the trade and environment front. This is presumably in response to European and other member countries speaking out in favour of legal engagement with the environment, also at the WTO.

3/5 What do we mean by that? Prior to the Paris Agreement, there was a very active discussion of what were the permissible trade law measures like border tax adjustments to preserve competitiveness based upon ideas like whether it would be lawful to charge differential tariffs based upon differing levels of energy and pollutants in producing, for example, a ton of steel (think carbon tariffs). The idea was that if a developing country used coal to smelt steel and thereby produced much carbon dioxide, plus used arguably more BTUs, that a higher tariff might be levied in a developed country to protect its unilateral adoption of higher environmental standards. It was considered as a strategy for developed countries that wished unilaterally to adopt more “expensive” developed country high pollution abatement and low emissions energy sources (like renewable energy inputs for steel produced from Japan as example), without thereby lessening competitiveness. And you will notice that such a trade law based “carbon tariff” would not be subject to whatever limitations might have been applicable under the Kyoto Protocol or Paris Agreement). So the problem is that as the US considered doing things like reactivating coal in the name of deregulation, it may work for domestically consumed production, but exported production also incorporating things like steel as an intermediate good may be caught up in the net of what were strategies developed to deal with developing country production. So the concern is how to understand the trade law exposure related to environmental actions? This is an issue that presents itself based upon the idea that for economic reasons, you continue to want to export goods regardless of your domestic discussions about environmental actions, etc. So the concept is that no (wo)man is an– economic– island from an environmental perspective, also under modern trade law, as applied.

4/5 The second issue is that the trade and environment overlap has been worked out largely based upon a jurisprudence that we shall cover. It mandates in part how states must rely on what other states may do in terms of certifying production activities (presumably including energy incorporated into goods, etc.). So in the environmental area, when you worry about trade in goods there are actually considerable constraints on unilateral actions. The hidden point there is twofold, first understanding what the restraints are, and secondly, to the extent it does not appear the Trump administration ultimately contemplated withdrawing from the WTO (the Chamber of Commerce folks really would have rebelled at that point), how you think they might come up in US trade dealings? There are technical issues like regulatory equivalence to touch on, but that is a fancy way of saying the extent to which a country may be constrained to accept how others do things to achieve similar environmental goals.

5/5 The third and final issue is that if trade and the environment overlap, how much is a conflict and how much is a felicitous opportunity? (There is actually a Committee on Trade and the Environment within the WTO structure.) The conflict versus opportunity question is largely an exercise in deciding how to deal with issues of regulatory style. The traditional take is that domestic environmental regulation is largely a command and control exercise, when you try to control pollution based upon point source abatement, etc. If you try to do more market-based regulation (carbon taxes to address market failure, etc.), how does this work in a global as opposed to a national market? There are formal discussions of “green” goods and technology in trade law’s long-running Doha Development Round, but momentarily trade law seems again in stasis as the WTO looks for a new Director General, and a lot of countries wait to see what happens in the November 2020 US elections.

Copyright 2020–21 © David Linnan.