Introduction
As environmental challenges intensify globally, countries are increasingly engaging in both multilateral forums and unilateral actions to address these issues. The intersection of trade and environmental policy has become a critical area of focus, particularly within the framework of the World Trade Organisation (WTO).
The WTO is primarily a trade organization but it also prioritizes sustainable development. This commitment is enshrined in the Marrakesh Agreement, which established the WTO. This role played by it is similar to the preamble of a Constitution that outlines its fundamental principles.
Although there is no agreement that caters to the environment, the commitment of sustainable development of WTO is reflected in its various initiatives. However, initiatives such as these aren’t all-encompassing, and a lot more can be done to address this interdisciplinary area at the WTO such as establishment of an agreement that would address this issue of sustainability by referencing other mechanisms. However, such an initiative is an arduous task.
WTO and Environmental Measures
Under WTO rules, member states can implement trade-related measures to protect the environment, provided that these measures do not serve as disguised protectionism and meet specific conditions. For instance, Article XX of the General Agreement on Tariffs and Trade (GATT) allows for exceptions to trade rules for the protection of human, animal, or plant life, and the conservation of natural resources. However, these exceptions are carefully regulated through the chapeau (the introductory paragraph) of Article XX to prevent arbitrary or unjustifiable discrimination. The ‘Shrimp-Turtle’ case is a leading example where the US argued that their measures to protect sea turtles were legitimate under paragraph (g) to GATT’s Article XX which talks about measures relating to the conservation of exhaustible natural resources. However, it lost the case because it discriminated in its treatment of WTO members, offering certain advantages to some while excluding others, even though the measures aimed to protect the environment.
Further, the Doha Development Agenda (DDA) marks the first instance where environmental issues were explicitly addressed in multilateral trade negotiations. The DDA seeks to achieve a more efficient allocation of global resources by reducing trade barriers and pursuing win-win outcomes for trade, development, and the environment. Key areas include agricultural negotiations and disciplines on fisheries subsidies, which have direct environmental implications.
Another example of the organisation’s efforts to integrate environmental considerations into the multilateral trade framework is the Environmental Goods Agreement (EGA) negotiations which involves 46 WTO members. The EGA aims to eliminate tariffs on environmentally beneficial products, such as those for generating clean energy, improving resource efficiency, and managing waste.
However, despite these initiatives the WTO is not to be understood as an Environmental Protection Agency, as the aim of these initiatives is to make “international trade and environmental policies mutually supportive” and its competence in the field of trade and environment is limited to trade policies and to the trade-related aspects of environmental policies which have a significant effect on trade.
Challenges Faced by Developing Countries
Many developing countries contend that the World Trade Organisation (WTO) is not the ideal platform for addressing environmental concerns. They argue that the organisation’s primary focus on trade liberalisation and economic growth often conflicts with environmental priorities and sustainable development goals. Moreover, developing countries often lack the technological advantages available to developed nations, making it difficult for them to meet the standards set by these advanced economies.
Additionally, there exists a perception that the emphasis on market access and trade rules does not sufficiently account for the specific environmental vulnerabilities of these nations or their need for support in building resilient and sustainable economies. As a result, many developing countries advocate for more specialised and equitable international platforms to better accommodate their environmental needs and support their developmental objectives, without compromising their economic stability.
Another significant challenge for developing countries is posed by unilateral measures which is a way to tackle the environmental challenges used by countries to influence or compel changes in policy of another state, typically a weaker state. Concerns have been raised about these measures that impose additional burdens on developing countries as one of the aims of GATT is to remove Technical Barriers to trade. These developing nations may struggle to comply with these regulations that act as barriers to trade and it robs them of the chance to frame their development plan. One of the most recent concerns about unilateral measures include criticism of the Carbon Border Adjustment Mechanism (CBAM) introduced by the European Union which risks being seen as a protectionist measure that places additional burdens on developing countries. CBAM imposes a carbon price on imports from countries with less stringent climate policies, potentially disadvantaging exporters from developing countries by increasing their costs and creating trade barriers under the guise of environmental protection.
As a result of these considerations, developing countries struggle to balance economic growth and environmental sustainability. On the one hand, economic development is essential for alleviating poverty, improving living standards, and providing essential services such as education, healthcare, and infrastructure. On the other hand, developing nations are also increasingly aware of the need to protect their natural resources and ecosystems, which are vital for long-term sustainability and resilience to climate change. This aspect is not adequately addressed within the WTO’s trade-centric framework.
However, other international forums like the United Nations Framework Convention on Climate Change (UNFCCC) do take proactive stance in addressing these challenges and some of its provisions such as the technology transfer and common but different responsibilities become relevant in a discourse on adopting these measures at the WTO.
The UNFCC provides for technology transfer, i.e., the process of sharing technologies and related expertise between countries to address climate change under paragraph 4 of Article 10 of the Paris Agreement. When implemented effectively, this framework addresses the challenge of green technology access while promoting economic diversification and poverty alleviation. It requires developed countries to share environmentally sustainable technologies, enabling developing nations to adopt cleaner solutions in their efforts to combat climate change. Common but Different Responsibilities, another principle under UNFCC becomes significant as it acknowledges different responsibilities that each country possesses, it is based on the logic that the developed and developing world cannot be treated at par in terms of their capacity, contribution to the issue and need to set own climate goals based on their unique circumstances. Thus, it becomes relevant to include UNFCCC in a discourse on trade.
Developing countries need to seek pathways that allow for economic growth while minimising environmental impact. This includes exploring green technologies, sustainable agriculture, and renewable energy, supported by international support in the form of finance, technology transfer, and capacity building to help them achieve a balanced and sustainable development trajectory. All these pathways are reflected in the UNFCC. This becomes critical as developing countries, including India, argue that environmental and climate issues should not be part of the WTO’s agenda, particularly when other international platforms already exist to address these matters effectively.
The Role of the WTO and Suggestions
While these arguments of developing countries are relevant, they overlook that the WTO has experience in regulating trade and could potentially play a far better role in environmental regulation. The WTO can facilitate technology transfer, provide financial support, and offer flexible transition measures to help developing countries balance economic growth with environmental sustainability, which is essentially the realization of the Paris Agreement. Moreover, there is a preference among developing countries to address environmental concerns through multilateral forums rather than unilateral measures. The latter can sometimes serve as disguised barriers to trade. In these regards, reference can be made to the US-Shrimp case as elaborated above that even justified environmental measures must not result in arbitrary or unjustifiable discrimination between countries. Another significant case is ‘Brazil- Retreaded Tyres’ where Brazil banned the import of retreaded tyres under Article XX(b) to protect health and the environment. While the measure had valid environmental aims, the Appellate Body ruled it inconsistent with the chapeau of Article XX, as exemptions for certain countries violated the non-discrimination requirement.
This is where the role of other mechanisms under various international forums such as UNFCCC becomes crucial when complemented with the WTO framework. These countries could urge the WTO to establish legal texts to make environmental obligations legally tenable and consider sufficient measures for developing countries.
The WTO can take a reference to these key elements of the Paris Agreement and adapt or lay out something similar to enhance trade in a way that mitigates the worst side of climate change. Moreover, it is also theoretically possible to adapt the UNFCCC in an agreement related to trade by systematically integrating them. The concept of systematic integration can be found under Article 31(3)(c) of the Vienna Convention on Law of Treaties, which requires consideration of other rules of international law in the course of interpreting a treaty. But even for a discourse on such an issue of using WTO to facilitate UNFCCC, the developing world needs to budge on their stance of showing resistance in dealing with environmental concerns at the WTO as the benefits of such an approach will be shared by all nations.
Moreover, any potential argument that stringent environmental measures create additional burdens for developing countries would not hold true as, while environmental regulations can present challenges for developing nations, they also offer opportunities for long-term development, sustainability, and economic growth. The WTO operates through agreements made with the engagement of member countries, so these nations could actively participate in negotiations that caters to their needs. For instance, the WTO could categorise countries based on their environmental vulnerability and financial health, providing targeted support to those at higher risk. This could include making cost-effective technologies more accessible with less financial burden and this initiative needs to be inclusive of UNFCCC on account of varying factors such as technology transfer, funding, and capacity building which becomes relevant for developing countries seeking to address climate change and environmental degradation.
Further, the WTO deliberation would prove to be successful, as also opined by Solleder and Melo in the Centre for Economic Policy Research (CEPR) that a successful outcome in reducing barriers to trade in environmental goods would create a double win, for trade and for the environment as reduction of tariffs and non-tariff barriers (NTBs) on environmental goods and services would facilitate trade by decreasing the cost of environmental technologies, increasing their use, and stimulating innovation and technology transfer.
Conclusion
The positions of developing countries significantly shape global climate policy and international cooperation. Their emphasis on equity, flexibility, adaptation, and support for capacity building reflects their unique circumstances and priorities. As global climate negotiations continue to evolve, the perspectives and demands of developing countries will remain critical in shaping a fair and effective global response to climate change. These dynamics highlight the importance of inclusive dialogue and cooperation in addressing one of the most pressing challenges of our time.
Thus, it becomes crucial that for an effective and efficient discourse, the developing countries realize the prevailing role that the WTO can play in countering environmental issues. The WTO need not become another international forum which primarily addresses environmental concerns, but it can certainly support the developing countries in their fight against this growing menace. In such discourse, it is necessary to take reference to existing agreements- their underlying objectives and principles to guide any further discourse. The UNFCCC, is one such leading convention that can be referred to, particularly the Paris Agreement. A new approach that combines the best of both the forums can lead the way in fulfilling climate goals and reducing the impact of trade on the environment and vice-versa.
Reema Yadav is a third-year law student at the University School of Law and Legal Studies (USLLS) with a keen interest in international trade law.
Picture Credit: Econofact
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