International Trade, the En vi ronment

and Climate Change '

Track l,hcrnlization has been a key driving force behind glo bal economic grclllth
~111et· rhc Sern11d World War. During this peri od, glo ba l environmental dcgrad.11100

re:Khl'd new heights. Three sets of questions a rise fro m this. Fi rst, is the li hcralrwron
of intern ;1tiona l trade re~ponsible for the global ecologica l cri sis, or do frl'l'r tr.idt.
111Crcased glo ba l competition and greater wea lth help to promote c11vironmenul
protectio n ;ind a mo re efficient use of scarce resources? Second, do the ru b of tht'
111tt·rn.1tiona l trad ing system (mainly the World Trade O rganization - WTO) help
or hinder effort~ to protect the environment, and a re international cnvironmcnul
.1g rccmcnrs consistent with the rules and o bligatio ns of the WTO order? ThirJ.
wi th rl'ga rd to the threat of global warming, does free trade undermine the clinwr
polic1t·~ of mo re am bitious countries because of the threat of industrial reloc,1t1on 111
lagga rd coumrie~. and should trade measures be employed as a tool of intcrnarion.d
clima te policy?
The~e and other questi ons about the trade-environment nex us ha ve hecn inrensdr
de ha ted fo r some time a nd remain critical to the future of the trading system. p:ir11cu-
l;trly with rega rd to climate change (for a general overview of the dchatc, set' Sa111p,on
2005 ). Th is chapter reviews the trade-environment debate and m .:ent scholar~h,p. It
o pens with a brief J i.,cu,;sion of the ge neral relationship between trade, thl' rn\'iron·
lllt'rtt, anJ climate change; rhen focuses on the institutional and jurisdictional n,ntt'xt
. rrJ Jca n d cn v1ronmenta
for . I po 1icy-ma
· k111g;
· · an an,1I),S1.5of the
and concludes with
rr:1dt.· implicJtio m of recent develo pments in climate change policy.

Links between Trade and the Environment

. . I J. I . . . I I l·1111llr,t)
Arc 1111crnarllln.1 rr;1 <.' an( en vironmental protection compa11h l' 11 r 11 _. _ th<
·1·wo type., o f c.1m:1 I 1111
· ks herween trade and en vironment 1:an Iw ll. It ·nt1h(J
f 11 1)(!
., I ' ' . I I,111, JI' " "~I , I ( ,.," IJ,JI (' /1111,11,· ,111,1 I·. 111 •1r1111111n1t
11 . .
h. r,r l·.d1111111. · t I11. l{,,l><·rl .
h. 1lln /'11 /1 cy,
O 20 I l Joh11 Wrlcy & Son,, I rd. 1'11hli,lwJ 201 6 hy !nhn Wilry & So m , I.rd.
 INTI HNI\ 1IONi\ l lH/\1) (
. 1111 I NVlHONM( N
I , /\NI) Cl lM/\ 11
c tt/\11c,1
tir,t t Il l' 1·t t1·l t I Ii.it 1. 1 •
, ·0 11Lt' rt1 S 111 1
' •'l l 1din 1I
11
1 ,,i,·t'll co1111tn or \\ur Id,, 1 I ·· I · ,1111111 h.1.., "" t
, t• . . I lt,lll·,vu111d r l'\'' · ll\11 1111111t111 1' 111 I
,he 1mp.1Lr t 1.11 L' 1n ·1r 011111 l'III ti . l J\e, th e p . . '1 11; 11 1
. I . j)l()(l'l(1011 I I' . ll\Pt'tliV\' .111d ,d I
~cncr.d. trcc-tr.ll l' ,11pponcr, ir I 10 iut·, h :1, l· on 1111. l ,, , .,.
. . . . gul' r 1.11 1,h .. I t 111.1111111.il 11,1tl1· 111
the cn , ·1rn nmc1lt while so 111 c l' . . u., lt'.lltg trad l' h,,..,
. . . . ,1, II o111ncnt ·tl .1 po""' v l'ilt-l ' ''"
11\h:1gw.H1 ;rnd Srt111v;i..,,lll 199(. 11 . • llll'a\urc.., po,t· .1 11ro1 . I
. . ), L' tllgc c>/ ii l9l ' lll1011"1 i 111·,11
l'il\'1rnnmcntaltst.., -;cc I rec . tr-ide' .,1\ one o· f the ( · • ~8; _
Bhag\\',llJ JOO-I) 1
. - . 11 to111r,l\1.
111
.u1d advoc:n e that environmental , 1. h ,\In c iu,e.., ol t·11v1ron ment ii 110 11 111 " 1
. ' 1() IC\' s OU Id I'1111 . ,- . )I
environment (Da ly 1993; Coldsmitl . · 1 ~ 1f ree tr,tdt· ,,hert 11 h.irm, th e
. d . 1 ,lnc i,lan<ler 7001 ) ·11 ·
ga111e new prominence 111 the contc t f _. - · 11 \ ,econd .1rgumtnr h.1'
, . I ff x o c 1ttnatc dnno . •I . . 1 .
rhat un ila rem c ore~ to reduce Cl rb , . . ' . r--C, ' ' ic rt' r ,.., ,0111e111m·, .1 rgul'd
. . . , on enw,,ron m1ghr h'f . I . I .
counme. wi th tnct regulation to th , . ., 1 r 111 t mtn,1 ,K11, II } lrom
O<,c Wtr 11 1axer reoul· r' Tl11· II
le,1kage" i widely reg·1rded to <l . · . r-- a ions. " ,0-c.1 ed "c,1rho11
'' un erm111e the cHecr of -r I ·
policic<, (Frankel 2009; Gro et al. 2010 ). c imare c 1.111ge m111g.mo11
Clo er examination of the empirical ··d b I· d •
. e\ 1 ence e1111 rhe e claims reveal-, a more
nuance d picture ( eumayer 2001) f .d - I •
. . · ree tra e can ead to more pollunng produc-
tion .and . greater
. consumpti . on of natural re clurces , a ·I rI1e case 111 · counrrie!. · rI1ar
: growrh sp_ec1~l1ze 111 the prod_uctto n of pollution-inten ive goods in respon<,c ro trade liber-
altzat1on, uch a Chm a, which ha een a dramatic ri e in air and water pollution
radarion
cau ed by the expan io n of export-oriented manu fac ruring (Economy 2004). Free
alizarion
trade can also promo te greater effi iency in production and the diffu!>ion of envi-
er trade, ronmental technologies and tanda rd worldwide, a can be ecn in more globally
1nmenta l
oriented companie ~uch a the chemical and steel industrie (Reppelin-Hill 1999;
e of rhe Ga rcia-John on 2000 ). The empirical record i al o mi xed when it come, ro the
-0 ) h elp impa t of environmental policie on trade. Environmental protection efforts can
nmenral disrupt international trade and give ri e to disguised protectionism, an accusation
? Third, ' ren leveled by developing countries at adva nced economic (O ECD 2005 ). Other
1 ure however ca n be compatible with the international trading system. Abol-
ng subsidies fo;
fo ii-fuel u e, for example, would n~t only h~I~ in the _fight
na nr ainsr glo bal wanning; it would al O promote a level playmg field 111 1nternan~nal
ibbin 2000) Overall therefore, genera 11zat1ons
nergy mark et (A n d er on an d MCK · . ' . . . .
· are problemanc. Trade ltberaltzatton and env1-
a bour rhe tra de-environment nexu .-
. b d t be in conflict and much depend on specific
ronmenta I protectton ca n, ut nee no , . '
circum ranee a nd policie under con ideratton. . •. h refore co foc us on
. k bout the e connections t ' r e '
A mo re useful way to t h in a d . t on the environmenr. Gros!.man and
parttcu . Iar mec h amsms
. by w h tc . h tra e impac. . Th scale effecr occurs when lib-
K ( 99 h ch mechamsms. e .
rueger 1 3) pro po e t ree u . h h' h in rurn increa es pollutton and
. d . I
era I1ze trade nmu ate economt
c growt w tc
f'
.
d to greater spccializa r1on berween
. h 1
·1io11 ef ect ea s . . I
re ou rce consumption. T e compos, d adarion a counrnc wirh owcr
· onrnenta 1 egr, ' · ·
counrrie and differential rate o f envir . . f nvironrnenra lly harmful acuv1ty
.
environmental standards wt ee an
·11 e pans10n o e
.
.
Th 1 /mique effe r 1nvolvc!. c llt: lll)
ffi --. ..
· respon e to trade-induce d specia
tn · I"12anon · e. ec d re our c cxrracrwn, · w 1i·1L·I1
• · f producnon an . I'1 1 • . I I
unprovcment in t he technolog1e or . ldwidc. Env1ronnu:nra ~ s ,H <
. . I rorecnon war · I ·I· Tl , fir-.1
can rat!.e the level of env1ronmenra P d by c onon11t: mm <.: s. 1.t ·
. I d to be neg ecrc I I · ·I .. n .., :.hilts nor
two further mcchan1s111s r 1ar ren I . ,rnliza rion, ,. lll I ere c .
· . . J by rrnc e 1I1Jt: • • . The -.prt',td of
t~ cultural change 111 soC1ety ca use . . . mprion pnrrt rns. ·
. t . lso tn consu
only in prod uctio n rcchnolog1es 1 ut ·1
414
~
~=======~G~LO~B~A~L~E~:~
I . ·1va
. ..
ilab1 1,ty o
consumerist va lues anc gre,irer ,
7
. .
:::::::;===
coNOMY AND POLICY

f goods leads to rising consumption

/ 20() - '
. f ·0111 freer trade (Pnncen ct a . 2). fhc
ffi . y g:11ns , d
which may outstrip any e c1enc '. the result of ever longer an more complex
second is the dista11ci11g effect tl~at ,s d nomic actors, from resource extraction
. lly disperse eco .. Tl . k , . I b' .
ch"1ins between geograp I11ca . d cl retailing. 11s wea ens tic a d1ty
. . t10nal tra e an
and manufacrunng to mterna 'bility for the consequence that their
, , .d 'f d accept respons1 . p .
of consumers to I enn Y an . re distant locations ( nncen 1997).
. 1ent ,n ever mo . b
decisions have on tI1 e environn nceptualize the lmkages etween trade
While the debate over th e righ_t way t~ co I policy-makers are keen to stress the
. . es mternanona
and the environment contmu ' . nental policies. Whether trade and envi-
. Of trade and env1ro111
mutual support1veness h ther or clash depends to some extent on
I. k. upport eac o
ronmental po icy-ma mg s d s are to be interpreted. We thus need to
· · · · nal norms an ru Ie c •
how ex1stmg mternano TI/WTO trade system affect environmenta l policy
consider how the rules 0 ~ th e GIA d gional trade agreements (e.g. NAFTA) also
d · Other bilatera an re
an vice versa. . . hip (Gallagher 2004; Heydon and Woolcock
ff t the trade-environment re 1anons I · h.
a ec h b t analysis focuses on the re anons 1p between
2009 ·. 123-142) ' butt e su sequen I 1· ·
.
d regimes
multilateral trade rules and environmenta po icies an ·

International Trade Rules and Environmental Protection

· of t he crea t'on
At t he nme 1 of the GATI (General Agreement on Ta riffs and Tr
in the late 1940s, there was no international environmental age_nda to pe
Understandably, therefore, the GATI did not includ~ any ~pe~1al prov,_s
the relationship between trade and environmental policy. Snll,_ 1t recogm
some trade restrictions might be needed in the interest of public health or
conservation. 1
The GA TT's main objective is to reduce the overall level of tariffs and
trade barriers through a series of multilateral negotiations. Its legal structu
based on a number of fundamental norms, most importantly reciprocity and n
discrimination. Reciprocity in the GATT system is evident from the conduct of neg
tiations. Rather than lower trade barriers unilaterally, GATT members have on!
agreed to reduce their levels of protection in return for reciprocal concessions from
others. Non-discrimination is expressed in two principles in the GATI agreement: the
most-favored-nation (MFN) principle (Article I), which requires each GATT member
to accord to all other members the same privileges it has granted to its "most-favored
nation"; and the national treatment principle (Article III), which demands that GATI
members treat "like products" imported from foreign producers in the same way as
those of domestic producers. The concept of "like products" is an important and
co~trove~sial ?ne !n the trade-environment context, even though no definite interpre-
t~t1on of 1t exists 111 GATT/WTO law and jurisdiction (Sampson 2005: 82). Interna-
tionally tr~ded goods may reflect different designs or production techniques, but are
to be considered as "like products" if they share important physical characteristics
or are .functionally equivalent (e ·g· cars by di'ffe
. ren t manu facturers ).
Article_~X, the only_s~ecific environmental provision in the GATT, sets out
the cond1t1ons for restnct111g international trad • h . f h man ani-
mal, or plant life or health e 111 t e mterests o u ,
(Art· XX( g)) • Such measures(Art. XX(b)) and the conservation of natural resources
· •fiably
are all owed I·f t hey do not arbitrarily and un1ust1
 1NTERNA Tl (INAL IRAOf , I HE: frNIRONMI N r. AND Cl IMA J t ( l • A Gf 41 ',

r , hll" n · n 1.111111tt IL'"\\ ICh ,11Jul.11 u111d1t11111, or ll>l1'ltr111 c , 1 dh •111 ) t d p r o

rir11111•1 l
J" t.l\Ltrt'; 1t 111 rill' 1.,1\l' ol ,uhd.11i-.t· ' h)) rhn 1. .111 hL· l 011,ulc· rt d ,,c-.. , ,,.11, .
n1Hll'I 111
,~ orlit·r, It·,-.. rr.1dl' 1ntn1-..1,t·, mt".1-..1irc, ,trL' ,l\,1d.1hle: .ind ,t (111 rht , 1,c
~Jf 1'1, Jl( 1
L I Li,e ( P )) t'tjUJ\,tlt'nt dome,r11. rn1nL£1011', .trt· 1111pn,cd ·" \\t·ll. 1lw (,\I I
r , ,1JL)\_ ,I r,
)\\-, l'IIVtrOrlllll'llf.ll L''\lt.'rt10n-, 110111 I[', rr.1dc dhuplrnn h111 ',( ,·k, Ill pre' \ c·nr
',u, .I ll (
.. Ji-.cn111111,rnon or rrorecrio111-,m ( ;\.cum.1, er 200 l: 2-l 2 \ .
~rern _ ·
\, d,-.1.u'>'>t:d helow, rhe (,.\ Tl 1.:onr.1111-, prm,,1011, rh.ir .ire hounJ r11 , , 111w
!11 0 l
·tin ti in ,, irh em ironmenral pol1cic,. flu, ,., mmr dc.11 h rht' t ....e ",rh rlw
,ion- JI .. ,,. nminarion rule fo r "li ke produu~." which proluh,r, 11w111lwr -..t .trt", tr11111
rr,rrrtrrng trade h,1-.ed on rhe \\',l}' 111 which good-, h,l\ l' hel'11 p1od111.td pro.. t,,
,nJ production merhod<; - PPM ). 1-'rom ,111 enviro11mem.tl pl'r,pt•lfJH', 11 h otren
rhr production proU.'\'> thar need. to be regul.tted (e.g. ro reduce gree11hrn1,e g.t,
t•mr'>\JOm from manufacturing ) ,rnd many inrern.trion,tl en, irollllll'rtt.tl .1gn·t•11wnt.,
,t·rl.. ro rcc;trict \uch cnvironmcnrnll y damaging ide l'ffrcr,. Indeed, l'll\ 1ron111t:11r.tl
t\r~ have long complai ned about the ,ATT\ "chilling'' efft·tr 011 r.1k1ng 011r tr.,de
111 c,1~url'., focmcd on polluring production methods ( Eckcr!)ley 2004 L
,\ lore recentl y, rh e crea tion of the WTO ar rhc end of rhe Urug11 ,1) Round h.1,
\J~naled a grl'ater willingne in the trading ~ysrem ro rccog111zt· the lcg1t1111 ,1q ol
rnvrronmenral policie (Charnovirz 2007). Thus, the pre:1111blc ot thl' ,\ t.1rr.1ke,h
Agreemenr E~ra blishing the WTO lisr usra inablc devclopmcrH ,111d env I ror111H.' llt .1 I
rrotccrion ,1-, e plicir objective for the trading ,y.,rem. Although nor leg.illy b111d
111g, rhe preamble represents a n imporranr departure from the GA TT\ pn·\lou,
rhrlo!>ophy of a strict eparari o n of rrade and environmental policy . h,rrhcrrnorc,
hecause rhe WTO also strengthened the GA TT's dispute c;crrlcmcnt mech.1111,111 .rnd
made m ruling-. It-gaily binding, the evolving WTO juri<;dicrion 011 L,l'>t''-i rnvoh,
rng rnvi ronmenral trade measures has assu,ned greater import,111cc in h.1l.111c111g rh t·
rrade-emironment relation hip.
Other norahle achie\ ement of the Uruguay Ro und include the Agreenwnr-.. on
Technical Barrier ro Trade (TBT) and o n the Application of )an1t.1n .111d Ph,
l<h,tnirary Measure (SPS ). The TBT agreement <,ets rule., for thl' m<.:' (.>f t<.·~·hn,l:tl
re~ulJtron<; Jnd st<rndard~ with a view ro minimizing rhc,r rr.1Je d1-..tort111g ,•tll·t·t
~)ter n 2009 ). Ir recognize<, the right of counrrie'> to impme -,uch llll',1,11n·, to protl'll
umJ n hcJlth and the environment, but ,;tipul <HC<, rh.tt the,t.· '>hould ht· not 111orl·
1r.idc-re~t · - · f - cx<1111ple, ,lll env1ronmt·nr.1 I l.1hd th,tt 111torm-.
n cttve flan nece-,sary. For
he . . 'J l)Out t I1e potentrJI
lOn umer · health rr,k'-i ,1''>0Cl,Hl'<. · l w,t h .1 p.1rt1utl:1r product coulJ
O
tt~~: rdercJ ~cc_ept.1blc under wro rule~, if a_rrl1ed 111 ,1 non-di,tr1m1n .11or~ Ill.Ill
nor tf It armc; :,olcly at PPM ch.1r,1crcn!>rll'> of .1 product (e.g. cirhon trltt·n,,r,·
01 '-,Ir fll..111 ( .
r
/J '\ J re l ·r
ll acrunng ). H owc,cr olunr,try mca\urc·, <.11th'" e ·o -1.tl cl, UL'.ltnl ln
J .
rh · . L or o nor tall under,. 0 1urn,dict1on.
r>la, ti· .S P~ .tgrccmenr, which de:il, \\ ,rh me.1<,11re~ to prclle~.-1 hunun, .1n,m.,I. >r
le.idtr10rkJ o r. h<.:.t .. I r,I , 1m1·1:t ry
I :illow~ :,r.,rc, rn t.t"t' i
,uc I1 mc.hurc, " hen· thn do iuit
1
.tnJ \P'- ~ rinirn.mnn or di,;g11i,eJ rr.tck re,tnl.lJC>r1, (( h.1rnm 11, I 1)•)•J ). J lw 11 I
'l.111 f J
l Agre ·n I I I
c: lt"llt\ HH 1 t'll · 0 11r.1 gc th e 1.trlllCHll/.l t tOll or trt'.IIH>ll n l llltl"rtl .lt lOll t i
\ .1 r , \ I .
he.- h,tw I · ' rr~, c 2.2 o t rhc A grcc 11w111 l11rrhcr ,pn.1hn th.lt \I'\ 11\chilln ,He- h)
1111, r . l O 11 ,.__.1e111 1. ,,l l.' rnnup Il'', 11I rr,,..I ·"'l""IIH"lll , l lllJ ,u th<..lt' ·
I\I , .. tl'l\tlh\_ ... , ,d ·11 •
l\jlflrc:rll . . .. ' ·
111,u tf, t ilt c..111 hc- lt'nt1)1lr.1nh ,11,1w11dc,I "hcri.: 1Yln . Ill! , 1nH1h, n I t,-1, •
''-'l' JlJ .. I .. 1'
• ) lft ,tdd1111111.d , · 1t·111111 ... 111l 11n11 .111 11111, 10 lw 1lht .1111nl 111 '-·'n, l> ll l • tull
1

b
 •
416 GLOBAL ECONOMY AN D POLI CY

==-====
risk ;1sst·ssmcnt "within a reasonable pcrio<l of time" (J\rriclc S.7). The SPS Agree
ment is the only trade agreement that formally recognizes p~ccllltion a<; a justification
for taking trade measures where there is scientific u'.1eertamty h,_,r so m~ evidence of
potential harm . The question that has repeatedly pitted the Wl O :tga lllst envi ron-
mentalists is whether such uncertainty is only a temporary phenomen on or a more
persistent problem that pervades many areas of environmenta l policy-making, such
as food safety and genetically modified organisms (Post 2006; Isaac and Kerr 2007).

Multilateral Environmental Agreements, Trade Measures, and the WTO

Of the over 500 multilateral environmental agreements (MEAs) that have been
created in the last four decades, a small but growing proportion includes trade
measures among their regulatory instruments. As trade restrictions become more
popular in global environmental policy-making, concern is rising that these measures
will increasingly come into conflict with WTO rules. The definition of trade measures
in MEAs is fairly wide and often imprecise. It most commonly refers to various
forms of restrictions on trade for environmental purposes, such as bans on the
trade of certain polluting substances or embargoes of specific countries that are in
breach of environmental obligations. It may also include other measures that have an
indirect trade impact, such as reporting requirements, labeling systems, prior consent
requirements, or fiscal instruments (e.g. taxes, subsidies) (Brack and Gray 2003: 5-
6). Some MEAs are designed to regulate trade, such as the Convention on Trade
in Endangered Species (CITES), while others use trade restrictions as one of several
instruments to support their main environmental goal (e.g. the Montreal Protocol
on Substances that Deplete the Ozone Layer) .
• Trade measures have become popular instruments in MEAs for a number of
reasons. They broadly serve three purposes (see Brack and Gray 2003: 13-15):

• Target environmental harm. Most trade measures in MEAs seek to tackle envi-
ronmental problems by restricting the international movement of products or
species that are potentially harmful or endangered.
• Promote compliance and regime effectiveness. Some MEAs use trade measures to
e_n sure the ef~ective operatio~ of an environmental regime. For example, restric-
t10ns_~ay be imposed to p_umsh c?untries that do not fully comply with a regime's
prov1s1ons, or t~ ~rev~nt 1_n dustnal flight to non-parties, so-called "leakage."
• Encourage participation m environmental regimes. Trade restrictions are also
seen as a ~orm of pressure on countries that are reluctant to join an environ-
mental regime.
. For example ' the Montreal Protocol' s pro h 1.b mon
. · o f tra d e w1'th
non-parties encouraged some co t · · · h ·
. . un nes to )Om t e agreement to prevent bemg
e~cl~ded from the international trade in regulated substances and products con-
tammg them.

Trade e~perts ?ave raised several concerns about trade measures in MEAs. WTO
ru )es reqmre environmental trad b • · I
-h Id . . . e measures to e non-discriminatory that 1s t 1ey
sb aou ndot d1sc~1mma~e between "like products" from different WTO
members or
etween omest1c and mternatio I d ·
' na pro uct1on. Where environmental treaties target
pro d ucts because of the und I · h
er ymg process and production methods rather than t e
 INfER NATION A L lHAD f., rH E ENVIHO NM[ N r , /\ND CLIM/\IL CII/\NC., L
4 1/
_--=.:=== = - = - -=- - - - -

.
cnv1ro1111 1t ,11 1-11
•
l]U;d itv, . ot. .tlit·
.
11rndue1
. .
it st·
·
lt·, •.111 )' 1.t:.~u
. Iting
· trat Ie 1111rrfen·11n
· · co11lcl lw
I
,t'l'il robe in hre;l ~h ot \V O o bligations. A fun he r an:a w here MFAs and th c WT<)
·rnk~ C<H111 ' L •
·hsh 1s• .w here 0 11e !Hrty •
t 0 .•1 ivLlL"Ac uses tratIe sanctions · again st a 11011
p:irry. bur bo~h parties arc mcm l~crs of the WTO. In such cases, the parry rhar suffe r..,
;i rr:1dt: sanction co ul d take action under the WTO a lleging breach of t rade rule~.

,.\s yet, no WTO n~em ber h ~,s ch a llenged an l EA in the WTO's d isp ure-sc rtlc111cnt
mechanism, but wi th grow m g use of MEA-bascd trade measure a future co nflict
over rheir \'VTO compatibil ity ca nnot be ruled ou t . The ne xt section considers w hat
recent WTO ~ispute settl em~nt cases tell u about the evolutio n of WTO jurisdiction
on rrade-en v1ronment co nflict .
l\· e been
les trade
Trends in WTO Jurisprudence
n e more
n eas ures Only a very small fracti o n of the over 500 disputes that have been considered unde r
neasures the GATI/WTO dispute-settlement mecha nism relate to environmenta l issues, even
though environment-related trade disputes have a ttracted a grea t d ea l o f public
attention. A closer examination of the m ost important cases revea ls important d evel-
pmenrs in trade jurisdiction. 2

Tuna-Dolphin

One of the earliest and most controversial trade-environment disputes concerned a

US ban on certain tuna imports as part of a wider effort to protect dolphins. The 1972
Marine Mammal Protection Act (MMPA) required US fishermen to use do lphin-safe
fishing methods to prevent the unwanted trapping of dolphins in purse seine nets.
umber of In 1984, the US Congress allowed the US to impose import bans on tuna fro m
-15): countries that did not employ dolphin-safe fishing methods. This trade measure was
designed to prevent foreign competition from circumventing the MMPA's provisions
::kle envi- and gaining an unjustified competitive advantage over US fishermen. When the USA
:>ducts or implemented an embargo on tuna imports from Mexico and a few other countries
in 1990, Mexico filed a complaint with the GATI, arguing that the US ban was
::asures to illegal as it was focused on process and production methods (the type of nets that
.e, resrric· trap dolphins), rather than the product itself (tuna). Mexico further argued that the
a regime's USA was not allowed to use GATT Article XX to force other countries to abide
kage." by its domestic environmental laws (extraterritoriality) . The GATT panel that hea rd
s are also the case decided in Mexico's favor in 1991, but the ruling never became legally
i environ·
binding. In light of the upcoming negotiations on the North American Free Trade
:rade with Agreement (NAFTA), Mexico decided not to demand the formal adoption of the
,ent being decision. In any case, the GATT rules gave any party, such a~ the USA, ~he right to
ducts con· veto a panel decision. The decision caused uproar among envtronmentaltsts and led
to a protracted debate in the 1990s about whether the GATT was fundamentally
h0stl·1e to environmental concerns (Esty 1994 ).
=As- \'QiO
~ t is the)'
na USA-Gasoline
iernbers or
a ties taf
get In 1990, the USA amended the Clean Air Act (CAA) in an effort to improve air
an the quality by reducing adverse emissions from gasoline use. The law mandated the sale
er t h

t ...
 NOM Y A ND POLICY
GLOBAL ECO

~
418 c-=,-~

. ·II1 heavil y populated urban :-irca-. I) Ut p ;0 te 1

) g·tS0 I1ne
&U'"8
< <
. ... t· . 1 ihrcd" (i.e. cleaner ' · . I" ga oli ne in mo r(.; rural areas. ·1 tr.
ot ic 0111 t , I O f "convennona • . 1· f 0 Prc\tn
· I rlic ..,·onrinucd ·so
1111rrcc . sac I · hi po II utll1 · g ga< o lin e 111grct 1ents rom• urban to rur tI A serie
remain as clca na\1~
•
. . 1 •fr in inexpensive but iig Y ntiona l ga 0l1nc must [> ed cc
.1s11 . I d that conve reat
1 c ean
,·trc·ts
· , rhe law also snpuI' are") By and large, dome ric refiners . were. allowed t(l lJ\ • £uro~ ,
wa . in 1990 (the " ba e me . lly in use in 1990, while foreign producers h de nostihtY ,
I . ti1 at were actua Ip . A a
individual ba e 111e . b he Environmenta rotcct1on gency (EPA de fa_cto ~
ro follow an average ba eline edt y t 11· 1 conflict with Article III of the GA TT !·
B ·1 argue wa as 11 farm111g
Thi , Venezuela an d razt 'd t In 1996 the WTO Appellate Body decid d ¢0'·
. t 1111
. ported pro uc . ' . .h c
di riminare d aga inS h d were indeed incon 1 tent wit Article III a d :he disput
· bl' hment met o s n
rhar the ba elme e ta is . I XX s the US had claimed. However, the Appel- manner e
6 . 'fi d by Arne e ' a
could nor e JUStl e th US mea ures were aimed at the conservation of natural safetYdel
late Body fo und that e b ere free to et their own environmental objec- use of pr
d that WTO mem er w · · I
r~ ou rce , ~n O
.
111 nformity with WTO rule , m pamcu ar wirh regard since the
nves provided they do co Th d · I b d {JS resistr
co rhe treatment of dome tic °
• an d f reign products. e 1spute sett h ementk o by, now
grounds,
operating . under the rrengt hened rules of the WTO agreement, d d'dr us toof a roader
. .
view of the env1ronmenta purp I ose of the trade . measure an I not ocus solely
_ on law, but
· ·
the d1•scnmmarory nature of the measure (Trebilcock a nd Howse 2005: 526- )28). precautic
che EU t
at least J.
Shrimp-Turtles
prone to
A similar ca e ro the Tuna-Dolphin dispute emerged in 1997 when India, Malaysia, (Lieberm
Paki ran, and Thailand filed complaints at the WTO agai nst a US decision to force
foreign shrimp trawlers to use so-called " turtle excluder devices" (TEDs)_ when fish-
ing in areas where ea turtles are present. The plaintiff argued that this measure, Brazil-R1
which was based on America's Endangered Specie Act of 1973, was in breach of In late 21
WTO rules a it threatened foreign producers with a trade ban if they did nor com- (recondit
ply with US environmental law. Again, the case was decided under the enhanced
the dispc
powers of the WTO agreement and in the context of the WTO's greater emphasis
after Bra
on balancing free trade with environmental sustainability. In 1998, the dispute set·
whether
tlement body ruled that the US import ban was generally a legitimate policy with
were just
regard to provisions under Article XX related to "exhaustible natural resources."
from the
However, it also found that the way the ban operated, and the fact that the USA
that the
had previously negotiated treaties on sea-turtle protection with some but not all
a breach
affected countries, constituted "arbitrary and unjustifiable discrimination" between
the Appt
~0-~embers: The USA subsequently changed its rules so that they were targeted
restrictio
at m~1v1~ual shipments_rather than at countries_ a practice that the WTO decided
st nd
wa~ J_u ified u er ~rticle XX. While the USA technically lost the initial case, t~e
XX. As
dec1s1on marked an important shift in WTO · • d' . . k l dged chat 1n Body aq
. . Juris 1ct1on as it ac now e . thechap1
certam circumstances, countries can use trade . h h • of prorecnng
natural resources The USA J t h measures wit t e aim ·ron· to "arbit
b ·. OS t e case not because it aimed to protect the envi
With the
menr ut because it had desi d h . · ilar ro
h b • . _gne t e measure m a discriminatory way - sim .
~;n~a~vp:~ca1~eoslme case. Cr~tically for the debate on whether the WTO and env1rodn~
are compatible th l' l . . . . h r rra Overa// ·
restrictions can be b d ' e ru mg a so pomted to the possibility t a if
ase on proce d d . h ounrry
these restrictions do n t b' . ss an pro uctton methods in anot er c ·ff rent
o ar 1tranly a d · •fi d1 e Over the
countries (Howse 200 2 ). n un1ust1 ably discriminate between
llleasure~
tejected;
 --~

INTERN/\ l lONI\I IHI\DL, IIJL I

=- NV1no NM1 NJ
' I\Nl) Ci IM
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1011 •\ /-!l 'll l' \ j ' \ • l ·to 1110raronu111 on (.0,I() a p1)rov I . (.,\l(h ) ll' I I . . H lo11,11111rr
, /J( . I I ,l \ ,l 11d ( I lt l· U
I nt. rlw C:\Tl· . \ l ·\ l
· . gand b,orec 1110 ogy '>l'ltors, th e USA , rn1port\. ll11d. . ro llllpt"r .,
•htr Jfl11n · h 1· , , Can 1 I ~r Jlrl',,url' f
· II ,lft' Bod, I, A"Q.:a c .1g,1111sr t er. s rc,1nLtic)11 I • l ,t, ,111d ,\ r11e111
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,
ihl'lr
,,·rrh .\rr,L·le fl! d·spurew.1~I the quc,11011 of whethe r rh , t·u n1,1r"l'l111gol (,.\1 0 ,- i lr11111:h1 1
•\\' t' \ l'r. the \
and. .It( '
ner even r mug Il a I1tgh . degree of s .·c. c. 'Ii ,v.l \ c11111 • Il'd lo ,tct in'· ' . I rht· he. .I ri of
. t PPd- fJn I' , f I Ut11t1 l lint . .1prrr,11111011.tn
rv.1non o f n . ,,, debate. T l e ll\t o r 1c \Vl () a l for nt.1uni ,urround . I I .
. arural J!e•: . . . ' ttrnto,eitle I" 11 1w <.\1O
rronmcnral ob · of pre.:aunon Ill cnv1ron111cnral risk r . I . .1 ( ,,pure over the lJ)J)
· ' JCC- ,-t . . cgu ,111011 prov ·d . · ropri.11l·
rc ul a r with re ·e the C.1rr,1gcna P1 otocol o n Brosafct, 1 d I c L0111rmn\l,tl 1101 .
gard ,n, , . ia )Cen ado r, I . . . . 1..1,1
lerncnr hod y, now l. re istanc:c (Falkner 2007). In 2006 the wrr() I P n 111 2000 111 the I.tu· of
. ' \v i ru cd l I ,
LI too k a broader .,,,unds, finding tha t the de facto GMO 111() . • g,lllht_t l l' l:U on proccd11r.1I
~· r.ironurn w 15 111 · .
o r fo us olcly 0 J~', bur did nor pa a s_u bsranrive judgmenr on the WT() c vio1:mun of \Xr l o
2005: S26-52B).n l!IKaurionary GMO lcg1slarion as uch. By th . . on\l,tt·11 n· of the EU\
r·· . . e t1111e r11c ruling , , .1
ihc EU had already revised ,rs regulation~ on GMO d l'f ~as , 1111011111.:ed,
. II
Jt lea r parna y, even r 10ug
I h .
tt GMO approva l pro s an I red. It . ntor·llori11111
. I I . , ces rc111J111, co111 plcx .rnd
,rone to substantia de ays due to domcsnc re isrance to agr . I . I l '
1 India, Ma lay ia, t
urberman an d G ray 2008 ) . ' • rcu t11r,1 irotec111101og1.
decisio n ro fo rce
fEDs) when fish -
1a r this rnca<;ure. Brazil-Retreaded Tires
wa in breach o ( In late 2004, Brazil decided to trengrhen its im port re rricrions on retreaded tin:s
1ey did nor com- m:ondirioned old tire for furth er LI e) from non-Merco ur countries, .irguing that
er rh e enhanced di( disposal of uch tire creates environmental and human health problems. A ye.tr
~rea rer cmpha-,1. 1fter Brazil impo ed the e re rricrion , the EU asked for a \VfO panel ro con. icier
. the dispute ~et- .-hether they conformed ro WTO rule . Brazil claimed rhar irs import rcstrictioll\
1are policy with tere justified under Article XX and thar it wa obliged ro exclude Mercosur counrnc,
ural re ·ourcc~... ·ITomthe re tnctions
. according. to rhe ru Ie o f rhe cu s.rom union · The . . EU countered
. .
-:r tha t th e U~A that rhe exemption of Merco ur counrrie from rhe import rcstncrh1onh co1tst1tlllt ctl1
ime bur nor all . I rher Bot t e ane am
ibreach of the WTO' no n-di scriminanon rue, among o . I Brizil's imporr
arion" berwecn iht AppeII ate Body rul ed 111 · 007 lb · fO r different rea ons, nar •
2 , a err _ Id be ·ustificd by Article
y were rargcred I .,,tncuons
"" . .
were inconsi rent wit
. h WTO I s and cou nor 1
ru e . SI - p- Turtles rhe Appcll.m
: WTO decided
initial ca c, th e I XX A ·
D.,
· s in earlier. rul111g
. such as US- Caso/me or .m m ,enral grounds,
UlJOY argued thar import ban can be 1usn e
. 'fi don env1ronn '
' but that
. I . res rhar rhey must nor lea
<l
· I XX npu a
wledged rhat in
n of protecting
:er rhe environ·
I ,L
~IC'chapea u (introductory provi ions) of Arne c
IO • b' . . . r.on berween C
ar itrary and unjustifiable d1scrnrnna 1
' . ,- I
ounrrics. " Br,lZII comp rtl
vrro I.
conform ro '\v • rut,.
'1th the DSB's request co revise 1rs . 1aws to make n em1
·ay _ imilar ro
:) and environ· l
,iliry rhar trade I ~erafl Trends in WTO Jurisdiction . nmcnr-rclatC'd tr.idr
rh cr country ,
·f
Over O .urisdicrion on_env1r~1111a-Dofp/Ji11 _-.t,d
ween diffcn:rir the past two decades, GATT/WTW~ . ea rlier rulings ( d (PPi\b) 011ts1dc a
I.
1
,~sures has changed considera bl y. ,' ed production mcrbo ·
ted trade restrictions a imed at proce ,in
 GLOBAL ECONOMY AND POLICY
420

country's own jurisdiction, the US-Gasoline case marked the ca utious hcgi .
. . . nn,ngof
less restrictive interpretation of environmental measures. In thi s case, the WTo a
. · · . Pant1
stressed that trade measures must not d1scnmmate among countries but ack
. l . nowJ.
edged that they can be based on grounds o f env1ronmenta protection. The Shri,
Turtle case further strengthened this shift in the WTO's interpretation of environ np-
. rnen-
ta l trade measures · The decision almost reversed the ear 11er. Tuna-Dolphin dee·1s1.on
by arguing that a trade measure based on PPMs can be directed at other countrie
under Article XX, and that animals can qualify as an "exhaustible natural resource!
that may be protected through trade bans. In the EC-Biotech case, the WTO Panel
reinforced the importance of non-discrimination and the proper application of reg-
ulatory procedures, but acknowledged the importance of scientific uncertainty in
justifying trade restrictions, arguing that a moratorium amidst scientific uncertainty
need not necessarily violate international trade law. Thus, WTO jurisdiction ha.s
gradually come to accept that trade-restricting measures under Article XX can be
justified for environmental reasons, but continues to insist that they must not con-
stitute an arbitrary and/or unjustifiable discrimination. Indeed, the primary reason
why environmental measures in Gasoline, Shrimp-Turtle, and Retreaded Tires were
found to be in breach of WTO rules was not the ultimate objective of these measures
but the way in which they had been applied (DeSombre and Barkin 2002).

Climate Change and International Trade

Climate change has added a new and urgent dimension to the debate on trade and
the environment: whereas previous trade-environment conflicts usually focused on
only a limited number of industries or countries, global warming affects virtually
every country and all aspects of economic life. Addressing climate change creates
fundamental questions of current and inter-generational fairness, equity, and free·
dam, and involves global collective action combined with unprecedented degrees of
market failure and scientific uncertainty (Stern 2007). Rich industrialized countries
are largely responsible for causing global warming in the past, but the majority of
future greenhouse gas emissions will come from rapidly industrializing emerging
economies such as China and India. In 2007, China overtook the USA as the world's
largest emitter, and in 2008, China and India together produced almost twice as
much CO2 as the 27 European Union countries combined.3
If some countries decide to reduce CO 2 em·1ss1on · wit . hout s1m1
. . ar com mi·rments
. . 1
from others, mternat1onal trade allows industr· l . . . h. ft from the
f h I Th 1a act1v1ty to s1mp1y s 1
.orme~ to _t e a tt~r. is ~a-called "carbon leakage" can occur in three ways: energy·
idntens1~e mdustnes physically relocate to countries with less stringent regulations;
omestJC producers lose market 5 h f . due·
tion· or a !owe d d f f . are to oreign competitors that increase pro he
' r eman or ossil fuels 111 . h" h l d ases t
overall price for the f I d h tg -regu ation countries ecre .
se ue s an t us leads tO · d I gu1.ttl011
countries (Frankel 2009 W b increase consumption in ow-re n·
tion costs local mark t ; de_ ~rand Peters 2009). Other factors such as rranspo\iv
' e con ltlons and the f . f n equ,1 .
or more important re b h. ' . cost o capital and labor are ore W t,er
and Peters 2009) H asons e md mdustrial relocation (World Bank 2008; _e 1s
· owever wh · d • [att01 '
such "leakage" und . 'h ere 111 u st nes move to avoid carbon regu' ges
ermmes t e goal f d . d d. our<'
ambitious climate policies. De . o re ucmg global emissions an . isc he111e,
peod mg on the type of emission reducnon sc
 INTERN/\TI O N/\l. TRAD E, T H E ENVIHO NM ENT, A ND CLIM /\TE CH A NGE '1 2 1

~
<>i
.
"' nn1ng of 1c:1k:1i.:i.: rares ( i_- c. r1_1c i11cr~a se _i 11 l' l1~i ssio11s i 11 low -regu la rion COll lHrics ;\<; ; \ sh;i IT of
Wl'o a .,ductions 111 high-iegnl.iuon countiies) ha ve hec n estimated at as hig h as o m· fourth
Pant'I
it ai.:k :-~,r rhc iron and _s rec~ sc~tor a:id_~p _to one third for the cement industry (Reinaud
no\vl.
he. SI7 r1n1p_
· JOOS) . When E~11 opeclll coui~ti ies 1 attfied the Kyoto Protocol and introduced rh e El J
11v1r 011 Emissions Trading ?che m e (_ETS ), for instance, th ere was great concern o ve r whethe r
. nie 11•
·111 dee· .
1s100 rhe refusal of the USA t~ ratify the Kyo to Protocol would all o w it robe a " free ride r "
T count. Europe' s climate policy (B_iermann and Brohm 2005), with some arg uing that th e
I ries 011
resource" US rejection of Kyoto can be interpreted as a hidden subsid y for its indu stry and ma y
VfO Panel rhus conflict with trading rules (Stiglitz 2007). 4
·1on of reg. Against this background, some have called for trade measures to be used ro
enainty ·In discourage carbon leakage and free-riding (Stern 2007; Stiglitz 2007). As Barrett
tncenainty (2010: 3) put it bluntly : "If trade measures can enforce trade agreements, why not
liction has use trade measures to enforce climate agreements?" A common line of argument
"<:X can be is that since the WTO has the strongest compliance system of any international
, t not con- regime, it could strengthen international climate policies (Biermann and Brahm 2005;
Frankel 2009). Two specific proposals for climate-related trade measures ha ve been
put forward. A first proposal involves taxing imports from countries that apply less
stringent carbon emission limits. A so-called "border tax adjustment" (BTA) forces
importers to pay a fee that reflects the costs of carbon emissions while exporters may
obtain a tax credit to avoid double taxation (Frankel 2009; Kaufmann and Weber
2011). A second proposal envisions requirements to purchase emission permits in a
cap-and-trade system so that foreign and domestic producers pay the same price for
emitting a ton of CO2. France, the USA, and the EU have already tabled proposals
for how to incorporate trade measures into climate change legislation in the form of
BTAs or the mandatory purchase of emission permits (Biermann and Brahm 2005;
1ge creates Cosbey 2008; Tarasofsky 2008).
, and free- Ideally, since all current economic activity in one way or another produces carbon
degrees of missions, trade measures ought to cover the largest possible range of products. One
countr; ay to do this would be to consider the carbon footprint of each individual product,
iajorii possibly with the help of a standard developed by the International Organization
e for Standardization (ISO 14067; see also Gros et al. 2010). While this would ensure
that a large share of international trade is covered, developing a comprehensive
method to quantify the carbon content of every traded product for tax purposes
is difficult: national authorities may not have the capacity to collect data, produc-
ers have an incentive to underestimate carbon content, and complex international
supply chains make tracing the carbon content of each individual component of a
~roduct cumbersome (Cosbey 2008) . It would certainly be easier to target only a
limited range of internationally traded energy-intensive materials such as aluminum,
cem~nt, steel, paper, glass, iron, and chemicals. This approach, however, may dispro-
Porrionately harm manufacturers in technologically advanced countries who import
lation these materials for further processing without significantly reducing emissions of
·ansporra· energy-intensive manufacturing in heavily polluting countries (Cosbey 2008; Weber
en equallY and Pet ers 2 009). Moreover, the quantity o f em1ss10ns · . . d wit
associate . h b as1c . maten- .
)8; Weber afls ~ery much depends 011 the source of energy with which they were processed (e.g.
ulations, ossil f I
g es Me ue s_versus hydropower) (Cosbey 2008). . .
scourag asunng carbon content poses further d1fficult1es. A system that seeks to
ri scherne, count th e emissions · · of individual firms ma y be too comp 1ICate · d to wor k , given · t I1e

•
 GLOBAL ECONOMY AND POLI CY
422

,ompb ir~- of inrcrn:trion:t I suppl Y_cha ins._Es'.~ hlishing_c ~rho,: ~

of indusrry ;t,·cragcs would be easier ro ,1ch1c, c hut r,11 sc.: s the quc~r1011 of w . a, 1,
industrialized or cmcrging-cconomy standards ,ll-C used as a point of rcfere1~e1_htr
whcrhcr actual emissions counr. Any aggregate national meas ure rai\t:!. ti . Ct (Jr
rion of how ro quantttv · - and compare d'ff f ·· ·
I erent types O emiss ion reduction
ie qu ·
. _t,_
· · · · · Of · Pol1c1e
Should the carbon 111tens1ty per capita or per unit economic output count, \.
10111
\\·ill changes in emis ion policies be reflected in trade measure ? How can · .~
tion be avoided where trade is simply redirected via a third country with noa ~itua.
) 1111nall
stricter emission targets (\'qeber and Peters 2009). Y
finall)' a critical question concerns the relationship between such measur
' ' . ' es and
international trade law On this there seems to be agreement that many of h
· ' t ese
climate policies could, in principle, be se~n- to conform to WTO rules (Bhagwaii
and Mavroidis 200 7; Frankel 2009). In a JOlnt report, the WTO and UNEP (2oo9.
xix ) argue that international trade rules permit, "under certain conditions, the us~
of border tax adjustments on imported and exported products." The conditions
however are crucial as are the trade rules under which conformity is claimed Fo'
' ' . r
instance, aiming trade measures at a country as such is likely to fall foul of the
most-favored -nation (MFN) principle, and the WTO has in the past been skepti-
cal of measures that seek to directly influence policies in another country (Tara-
sofsky 2008; Messerlin 2012). Equally controversial is the idea of trade measures
aimed at process and production methods (PPMs). Although the WTO Appellate
Body found in the asbestos case that "consumer preferences " are a valid con-
sideration for distinguishing products that would normally be treated as "like"
products (Kaufmann and Weber 2011 ), it is questionable whether products can be
treated differently based on the energy and emissions profile of production pro-
cesses which do not affect the final product as such (Weber and Peters 2009).
Furthermore, growing reliance on national or regional emissions trading schemes
has led to situations in which governments provide direct or indirect subsidies to
domestic companies (e.g. by allocating low-cost permits or offering subsidies ro
compensate for the costs of permits), which may violate provisions of the WTO's
Agreement on Subsidies and Countervailing Measures (Henschke 2012). Alrerna·
tively, the compulsory inclusion of foreign companies in such emissions trading
schemes can be seen as a unilateral act that falls foul of the WTO's restrictions on
the extraterritorial application of domestic environmental laws, as can be seen in
the international spat over the EU's plan to include foreign airlines in its emissions
trading scheme.
On the other hand, it has been argued that many climate measures would con-
form to Article XX of the GATT on the depletion of natural resources (Biermann
and Brohm 2005; Kaufmann and Weber 2011). The outcome of the Shrimp-Turtle
case can be interpreted to have "legalized" trade measures aimed at process and
production methods, and the decision in the US-Gasoline case defined clean air as
an exhaustible natural resource. Together, these two decisions may have paved the
way for trade-related climate measures to be consistent with world trade law (Bhag·
wati and Mavroidis 2007). Indeed, since climate change also affects biodiversity, rbe
"cIean air . " dec1s1on
. . might . d
not even be a necessary condition for a tra e me
asu re
to confor'.n to ~O statut_es (Wiers 2008). Thus, while CO 2 -related t~ade ~e:~~;~;
are techrncally difficult to implement, 5 they may not necessarily conflict wi th
~~
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IN l (HNI\1 IO N/\1 I H/\1 >I , 1111 I NVIIIONMl N
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l ' ll(lt) L I • 11 1
, rio11:1l coopcra t1 011, thcrl' i., co,,.,id,, .. I I • . ' l c • gl' rl'q111n·,do,t· 1111t· i
Ho\\' ,. 1 · 11 0,,. . . -.r ,1 1 c co11ct:r11 rl 1.11 11111·1 I
... , n a ,· 11-01dd undc r111111 c international 110 1,·t· .. I . ' ,11 er,1 t r:tdl' 111l",1,1ir1·,
rr~- With . ttua, lea 111 Oll' ~'><.:'> ·1 I . I I
rive (Coshcy 2008; Weber and Pct.. ,·, JQ()O , · l1t cot1 t prove cou111npr<,cl11c
no1n1na11v r 1>·irrctt 70 10) J\f
sripularc~ that emerging l'COll()lllil'~ have " , . " ' -
- : tl'r :1 11 , tl<.:
I
UN l-~,u.
'\llch n1"•1 . •· cl · I ,
ne~ ,rn 111 r 1c run-up to r 1e '009 C I l<>nimon
I !mt
. d1((ere11t1ated re,1 1om1bi1 1
.... , , Ure
hat n1any 0 f and 'I . . •
Jevc op111g countne<, warned that: - open iage11 cl11nntc conferl'11ce ' a groun of
,.
0 rule (Bl · the
se
and U E 1agwat, Parries ,hal l nor resort ro anv for m o f unilarer·il 111 ,. 1, , -I 1· r· h
. . . p (20Q9. . • ' • ~ • .,Un s, lll C ll( 111g I\C.I 1,111(1non- \l ,11
-Ond1t1on th · hor<lcr 111e,1sure • aga111,r goo<ls an<l , · - · If •
. . • crv1cc 1mportct rom orhcr P,ir11es, in parricul.1r
" T , eue trom dcvel op111g country Parrie • on r,rount
" Iso f s.u I,,·111,m
· ·o n and m1rig.1t1on
.. • of cl11111rc
·
. .
he cond tt1· ·o ns
change (Ad Hoc Working Group 2009). '
11t y I lail""n ,
to fall
Indeed, Charn ovitz (2003) a rgues that politica l concern over rrade mea~ure, ha~
already led to a "chilling effect" in environmental negotiarion~(sec abo Coc,bcy 2008:
6). Propo a l for com pen a ting developing countrie by transferring the revenue from
uch trade mea ure (Biermann and Brahm 2005; Weber and Peter 2009) ma y go
ome way ro a uage their concerns but may not olve the underl yi ng problem of
carbon leakage and shift in competitivene . Furthermore, rrade ex pcrr warn that
as " like" unilateral mea ures would lead ro a "slippery lope" towards an ab use of climate
ucr can be change for protectionist purpo e (Bhagwa ri and Mavro idi 2007; Frankel 2009 ).
ducrion pro- Srill, climate leader will be tempted to u e trade mea ure a a ", rick" in negotiation
Pe ter 2009). to put pre ure on other countrie to join a global agreement.
trading cheme
:lirect u bsidie onclusion: Global Policy Implications
ub id:
The trade-environment nex u remains a controver ial and challenging i ue on the
international trade agenda. ome progre s ha been made in identifying the circum-
stance in which internationa l trade and environmental protection ca n be mutually
compatible but everal area of contention and conflict remai n.
The firs; area relates to the WTO's general approach ro environmental policy.
Some ob erver ca ll on the WTO to become more engaged with environmental i ue ,
nor lea r ince the WTO a lready adjud icate ca e rhat _involve conflic~ between
environmental mea ure a nd international trade law. Gi ven the WTO de facto
in1pact on go I b a 1 en vlfonmenta
· I policy , rhey argue rhat the WTO . should takeI on
iermaflfl 1no re forrna I env1ronmenta
· I re ponsibilitie ' even though. derails of such a co er
;mp-Turtle engagement wit · h t h e goI b a I enviro
· nmental agenda remam .sketchy.
and · h On theII other
k
t process han d, concerns have been rat. ed tI,at environmental protection .
mrg t actua Y rn ' t'
· f I ·1 I
air as b k . I d enda due ro an 111creas111g use o ) t arcra
. ned clean d rhe a ac eat on the internationa tra e ag d low inrerc •r nmong some
a e II
iy have P (Bhag· agreement instead of multilateral one an a ger~era(Ny r lOO~ ) The WTO
. . . . I prorectton eumayc .
. trade Jaw. rhe countries 111 1 ues related to envlfonmenra ·s debare, raring repea redl y rhar, while
. di vers1tY, has so fa r trod a careful path through th i
S b JO ,,sure ·r docs nor consider irsclf ,ls an
. a era de
roe" res ·
it arms ro contribute ro susra111a • bl e d eve lo11menr, 1 •

J environmental protection agency (WTO 2 oo 4 ).

 424 GLOBAi. ECONOMY AND POLI CY

The set"u11d .trl',1 n·l.11t·s Ill die i111t·rpn·1·:1tion of l' Xis1i.11.g leg:il pr()vi1,ic~
/
c\'olvi11g m.111d:1lt' ;111d i11sti1111io11:1I lra111l'Work, tlie WI () ha s h:1d '> ip,ii f'ic•i l:'> pitcan bY ti
. I I , , nt diffll
u11 t'l'rtai11 t·11vin111111t·11tal 111eas11rl'S, as 0111'1 111 et a )ovc. Pa -;t dcci1,ic >n1, hav. _1111 Paq
ch ri rltd p\e3
\\'lut .1 "11ct:t·ssary " c11viro11111l'11tal measure .is; w I,at .is lllt'allt I1y "<· xha u1,1 il)\e ..
. . 11 e n·1t
n·sourt"e" ; whether measures can extend cxtr,itcrntoria y; and l1ow "arhitrar ',,ura\
"u11justitiahle" should be interpreted under t~1e chapeau of Artich: XX . Di~a ,a11 u r,101

mt·nt still cxis·ts however with regard to cnv1ronmcntal measure!> ·1i 111 ,,J
· , , . ' " at Pp~rec. M
especiall y when they are "unincorporated," that ts,_when th~y ca ll not be dctectc<l \
the final product. The definition and use of precaution remams equally contested in
has been illustrated by the EC-Biotech case and the question of "sound" scie 'a\
. . . . . . . nee a\
a cntenon for poltCy-makmg versus a broader 111terpretat1on of the evidence b
as1\
for risk assessment.
The third area relates to the question of inclusiveness and transparency of decision.
making. While the CTE has been tasked with addressing the relationship betwee
MEAs and the WTO, both in institutional and jurisdictional terms, there remain~
considerable debate on how to integrate the two, especially when the former con-
tinue to employ trade-restricting measures that remain vulnerable to challenges
under WTO law (Eckersley 2004; Palmer and Tarasofsky 2007). Another con-
tentious point is the access of external stakeholders, especially civil society and
NGOs, to WTO decision-making processes. While the WTO has promoted dialogue
with interested organizations, NGOs continue to raise concerns about the lack of
transparency in the WTO's deliberations and negotiations, especially with regard to
environmental issues.
The fourth and final area relates to the increasingly important impact of the
climate-change debate on international trade. As states explore different options for
reducing greenhouse gas emissions and global climate governance becomes increas-
ingly fragmented (Falkner et al. 2010), it is becoming clear that trade measures will
be part of the international effort to combat global warming. This could be in the
form of border tax adjustment to address international competitiveness issues, pref-
erential treatment of climate-friendly goods and services, renewable energy subsidies
and product labels indicating carbon content, among others (Brewer 2010). Efforts
to enforce international climate policy through trade measures may test the scope of
Article XX (Frankel 2009), and a push to target carbon content in internationally
traded goods may test the WTO's willingness to accept unilateral trade measures
that are based on PPMs (Hufbauer and Kim 2009). The WTO itself recognizes its
responsibility in the international community to address climate change as part of its
sustainable development agenda, but sees its role primarily as an arbiter of conflicts.
The challenge will be to avoid the trap of green protectionism, where general trade
restrictions are used to seek compliance with quite distinct climate goals. Climate
policy may yet prove to be the biggest challenge for the WTO's ability to manage
the trade-environment relationship.

Acknowledgments
· on but extends Falkner and Jaspers (2012). Research tow·
Th'. 1s chapter bmids 1rd5
,,' he
1
rh1s chapter was supported by a grant from the Kolleg-Forschergruppe (KF_G); ded
Transformative Power of Europe" at Freie Universitat Berlin. The KFG ,s tun
 INTERNAl IONI\L lHAnr Tl IL -
- -- ' ENVinONM ENl
-======== - -=- - -=- --=- , /\ND CLIMArF CH/\NGE
'l25
by rhc Gcrm :111 R t'SL':trl·h l-'ound:1ti o n (I : ,
.. . .. I . I ' ) I (,) ·1II I I ·.
llittusI0 11 ot ll L':t s Ill i- lL' 1-.U\ i 11tc n1 ·1I . I . t lt 111g\ toge1hn re\e·1r ·I h
. · ,111( t'X tt' rn · I . ·I· . . , l I c>r1 t ,.
pk:tSl' (011sult www .tr:rn sl o r1neu ropt' .eu . ,t It .111 0 11 s. I-c ir furth er i11forin:1t io11

Notes

A comprehensive guide to WTO l·n . , • . .

. . · v ,lllu J1 1nsd1ctio11 in r ·I · .
found 111 _Bernascon1-Osterwaldcr et al. ( )_ t atton to env1ronmcmal 111a11rr, ca n he
2006
2 An overview of these a nd other enviro
nmcnt-re1ated ca cs is II I
can be found at: http://www.wto org/ . h/ • '' we as pane and appellate body report~,
· eng 115 tratop e/disp Id'
20, 20 12). - · u_c tspu_status_c.hrm (accessed October

3 United Nations Statistics Division (UNSTATS)

decision- aspx'srid=749 & crid- (~ d O ' avai1able at http://mdgs. un.org/unsd/mdg/ScriesDera il
·' ' · . - .. ccesse 20 ctoher, 2012).
between 4 Bhagwau and Mavroidi (2007) however d'
. .h ' ' isagree and argue that for a subsidy in the fo rm of a rax
rebate to con fl 1cc wit world trade law a co t c
h f • f d . ' un ry muSt nr sr Signal rhar it intends to impose a rax but
r en re ram rom omg so. In the case of the Kyoto Protocol, this was not the case for the USA
5 Gros et al. (2010 ) a rgue that there are no ...msurmounra ble practical
· ·
obstacles" ro introducing a CO2
border tax.

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