III. The WTO and Environmental Governance: Reconciling the Multilateral Trade Regime with Sustainable Development

Seattle: The Convergence of Divisions

In many ways the failure at Seattle can be attributed to the convergence of a series of underlying tensions that have characterised world governance since the end of the cold war. While they surely contributed to the tensions, circumstantial causes such as timing, inadequate preparation, US electoral politics, demonstrations, and riots cannot entirely explain the Seattle debacle. Seattle's failure takes root in major underlying weaknesses in the WTO, notably a lack of transparency (from a western civil society point of view), inadequate participation by developing countries, divisions on the scope of the new round, flawed negotiation procedures, unresolved implementation issues, and conflict over the liberalisation of agricultural markets. The issues at stake are huge: the OECD has estimated that a new round of trade liberalisation would generate annual growth of 3% or US$1,200 billion in global economic activity.²⁵ But the dividends of growth ought to be more fairly shared among the WTO's 135 members. The next round will indeed have to be oriented toward development.

Environmental protection and related competitiveness issues are also fundamental aspects of the multilateral trade liberalisation process. As Esty and Geradin have argued, "if freer trade is to achieve the full measure of social welfare gain it promises and avoid the allocative inefficiency of environmental market failures, competitiveness concerns must be tackled head on. Moreover, continued public support for trade and investment liberalisation in many parts of the world depends on public confidence that other values about which people care (including environmental protection) are not being sacrificed at the altar of free trade".²⁶ The WTO has therefore launched many initiatives to develop a trade liberalisation model that brings a significant environmental dividend and does not foster downward competitive pressures on domestic environmental regulations.

The WTO has invested considerable energy in analysing trade and environment links over the last five years. In 1995, the organisation created the Committee on Trade and Environment, which produced a useful body of work on trade and environment issues and contributed to the development of closer ties with secretariats of MEAs. But the CTE was plagued by disagreements over basic principles and consequently has been unable to produce any concrete recommendations since its creation.

While a comprehensive legal analysis of environment and trade issues at the WTO would be beyond the scope of this chapter, it is essential to take a closer look at some of the core elements of the debate. Indeed several issues pertaining to the consistency of trade and environmental agendas contributed to the Seattle failure and will have to be addressed in the next round of negotiations. The following are some key aspects that are putting pressure on both the WTO institutional regime and the broader structure of global governance where attempts to reconcile the trade and non-trade agendas of globalisation unfold.

Environmental Regulations and Market Access

There is considerable asymmetry between the advanced state of liberalisation of trade in goods and services that is of interest to OECD countries and the barriers to trade that persist in labour-intensive goods exported by developing countries. Commodities — especially food and fibre, and their processed products — that constitute most of developing countries' exports, continue to face high barriers to import in OECD countries. In 1992, the Human Development Report estimated the cost for developing countries of these trade restrictions to be US$500 billion annually in lost exports revenues, almost ten times the amount those countries receive in aid every year.

While all quantitative restrictions on developing countries' exports of textiles and clothing should be removed by 2005 under the Uruguay Round regime, developing countries will continue to face tariffs as well as non-tariff barriers in the form of standards, regulations, labelling, and other environmental measures. In this context, developing countries have often come to consider environmental regulations as disguised protectionist measures designed to restrict access to OECD markets. They also tend to perceive the inclusion of environmental and social protection issues under trade negotiations as threats to their national sovereignty. For these reasons, countries such as India, Brazil, China, and many others repeatedly oppose any discussions on environmental standards in trade liberalisation talks. Clearly, the issues of fair market access and environmental protection cannot be separated because developing countries fear the latter is a threat to the former.

Trade-Related Aspects of Intellectual Property

The Trade-Related Aspects of Intellectual Property (TRIPs) agreement came into force in 1995. This agreement is intended to protect intellectual property and therefore constitutes an important tool for promoting research and development activities, as well as technological innovation. Although each country implements its own regime of intellectual property rights, these regimes operate in the realm of the TRIPs agreement, which imposes minimal standards on patents, copyrights, trademarks, and trade secrets. While TRIPs bear the potential for an important technological and economic dividend, their implementation poses considerable problems for many developing countries and for the protection of biological diversity.

The TRIPs regime's relationship with the Convention on Biological Diversity is complex and even muddled. TRIPs allows for the appropriation by TNCs of traditional knowledge and biological or genetic diversity through patenting. Yet Article 15 of the Convention focusses on the equitable sharing of benefits of biological diversity and the Convention contains many provisions for protecting indigenous knowledge. TRIPs can also considerably raise the price of technology transfers to developing countries. Private appropriation of contents and knowledge within the TRIPs regime carry the seeds of a future division of the world between the knows and the know-nots, compounding the separation of the haves and have-nots. Many analysts have concluded that modifications to the TRIPs regime are necessary to create a system that gives developing countries access to knowledge and technology and protects biodiversity and traditional knowledge.

Precautionary Principle and the Relationship with Multilateral Environmental Agreements

The inclusion of the precautionary principle in trade agreements also complicates the reconciliation of trade and environmental agendas. A widely recognised version of this principle states that "where there are threats of serious or irreversible damage, lack of full scientific certainty shall not be used as a reason for postponing cost-effective measures to prevent environmental degradation".²⁷ It constitutes a powerful preventive tool at the service of environmental protection. Its coherent operationalisation into a rules-based multilateral trade regime remains problematic: the fear that it could serve as an umbrella for a series of disguised protectionist measures is legitimate and must be properly addressed.

The precautionary principle was integrated into the Cartagena Protocol on Biosafety, which was negotiated in Montreal under the Convention on Biological Diversity in January 2000. This integration brings to the forefront the issue of the relationship between MEAs and the WTO. While some instruments such as NAFTA or the Montreal Protocol on the Protection of the Ozone Layer clearly establish the paramountcy of trade-restricting practices contained in a series of MEAs²⁸, the WTO's founding texts remain silent on this issue. The Cartagena protocol, which considers a series of trade issues in the biotechnology sector, has an equal "and mutually supportive" relationship with trade agreements.²⁹ This situation could eventually lead to a clash between the trade and environmental regimes in the case of a trade dispute. It is clear that the general relationship between the two regimes will have to be clarified.

Trade-Distorting and Environmentally Damaging Subsidies

The elimination of trade-distorting and environmentally damaging subsidies constitutes a key strategy to link the trade and environment agendas. The United Nations Commission on Sustainable Development has estimated the total amount of these subsidies to be US$1,000 billion a year.³⁰ For example, subsidies in the world fisheries total US$54 billion annually and provide 20% to 25% of revenues in this sector, with half of this amount spent in OECD countries.³¹ These subsidies contribute to over-exploitation of fisheries resources, sometimes to the point of near complete depletion, and constitute distortions to trade that are detrimental to developing countries. It is estimated that the elimination of these subsidies would divide the world fishing fleet in half and thus allow for the regeneration of endangered fisheries resources. Developing countries would benefit considerably from the massive reduction of OECD countries subsidies in this sector. Significant gains could also be made in such sectors as energy, forestry, nonferrous metals, textiles, and clothing. The politics of subsidies elimination, however, will make it difficult to bring about such rational treatment of the issue.

Yet the elimination of such subsidies would constitute a triple-win strategy: that is, a strategy that has the potential to benefit trade liberalisation, sustainable use of natural resources, and economic development. Such elimination would normally benefit developing countries more than the introduction of new environmental standards or regulations. The 1999 WTO report on trade and the environment identified the elimination of remaining trade barriers on environmental goods, services, and environmental management systems, as well as the reduction of trade-distorting/environmentally damaging subsidies as two issues to which the WTO could add the most value for sustainable development.³²

Transparency and Participation

Lack of transparency and inadequate representation result in credibility problems, bringing about poor levels of support for the trade liberalisation processes both at the national and international levels. Transparency, effective participation of civil society, and adequate representation of developing countries are fundamental areas in which the WTO has tried to improve its credibility and secure support. While the WTO has made some efforts to expand participation in its work, its actions fell short of an effective strategy to integrate NGOs and intergovernmental organisations (IGOs) — especially MEA secretariats — in its decision-making and dispute resolution processes.

The WTO opens its doors to civil society mostly in the form of informal consultations and improved communications with NGOs and IGOs. However, the core of its work remains strictly intergovernmental in nature and in camera in method. In 1996, the WTO adopted guidelines for the participation of NGOs that focussed on improved communication channels and open meetings such as the Symposia on Trade and Environment. While they were intellectually productive and fostered a fruitful dialogue, the symposia were not policy oriented and no attempt was made to summarise issues or generate consensus. Their influence on negotiation processes was therefore very limited.

The effective participation of developing countries constitutes another challenge. Many of them do not have the resources to participate in preparatory meetings. The issue of representation is also made more acute by the absence of 50 countries that do not have a seat at the WTO, including major trading countries such as China. At its General Council meeting in February 2000, members of the WTO agreed to improve and regularise funding for its technical co-operation activities and to co-operate more actively with other agencies such as UNCTAD to support effective participation by developing countries and facilitate implementation of key trade and investment liberalisation provisions and policies.

The WTO will need to make progress toward a better integration of the sustainable development agenda at the core of its work. Mainstreaming sustainable development into the WTO's trade disciplines, negotiation groups, and dispute resolution panels remains a considerable challenge. This could mean amending or reopening some treaties and reforming negotiation processes and dispute resolution procedures, as well as welcoming the expertise of new actors from civil society and international organisations.³³ It is now clear that the WTO cannot address the trade and sustainable development relationship alone and will therefore have to co-ordinate more closely with secretariats of MEAs, various UN organisations, and NGOs. In doing so, the WTO would succeed in both allowing for better representation and transparency and better integrating non-trade agendas in its work. Facilitating this presence of developing countries and opening up meaningful channels with NGOs and IGOs is of capital importance for the success of further negotiations.

The Need for Institutional Reform and a New North-South Bargain

Seattle destroyed any hope for a quick start of a new round of multilateral trade liberalisation. Negotiations on agriculture and services resumed in January 2000 without much hope of an early resolution. In February 2000, addressing the UNCTAD X delegates, Mr. Moore declared that the WTO would work on a confidence-building agenda in the next few months, recognising that the WTO will need to build the next negotiation round on a new North-South bargain. However, while it can do much to improve its institutional framework, the WTO also needs to broaden its agenda and co-operate with other organisations to work out new integrative governance models that will allow for the reconciliation of trade and non-trade agendas of globalisation. In short, the WTO must elaborate both an in-house plan and a strategy for external presence. Ultimately, the success or failure of the WTO will depend on this reconciliation of trade, environment, and development agendas under a broadened system of global governance. In the words of Mr. Moore, the cost of failure could be a stop to the multilateral liberalisation wheel and a return to trade-distorting and development-slowing regionalism.

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