7:34 AM Jul 8, 1993

DEVELOPING NATIONS REJECT PROTECTIONIST ECO-CONCEPTS

Geneva 7 July (Chakravarthi Raghavan) -- The multilateral trading system will disintegrate if concepts of trade restrictions to offset differing environmental standards or production and processing methods (PPMs) leading Third World countries have warned in the General Agreement on Trade and Tariffs.

The strong views of these countries over concepts like "Ecodumping" and "PPMs" being advocated by some of the northern environment lobbies and in more disguised way by their governments, came at this week's meeting of the GATT Working Group on Trade and Environment, chaired by Amb. Hidetoshi Ukawa of Japan when it addressed the follow-up to UNCED.

India, Brazil and Mexico were among the developing countries who reportedly advanced these views and comments, while focusing on some of the issues raised by the UNCED recommendations in Chapter 2 of Agenda 21, relating to trade and environment.

Among the industrialized countries, Austria and Switzerland, also presented some views from the opposite side -- though very carefully couched, the two clearly favoured moving in the direction of legitimising some trade restrictions in the name of concepts pushed by some environmental protectionist groups, namely, "eco-dumping" and discriminatory duties to compensate for cheaper imports due to different "PPMs". The two did not openly avow such doctrines, but sought an analysis by the group and the secretariat on these concepts -- the preliminary step to bringing such concepts on the GATT agenda and providing some "rules" and "exceptions" to allow such concepts being used.

The Swiss delegate wanted the group to take an active role and give close consideration to the PPMs. A higher environment standard by one country would mean its exports would be less competitive in another with lower standards, creating trade distortions that would have to be reduced or mitigated through harmonization. The same would also apply to imports, and the group must address how the trading system would deal with the PPMs. The GATT secretariat should also be asked to elaborate on the economic implications of ecodumping in the producing countries as well as on trade flows.

Austria also suggested that the UNCED followup was now split between the CTD and the working group and this might not be the most efficient way and all the issues should be addressed in one fora. In the area of environment, "traditional GATT law" should not be the only yardstick against which behaviour of parties should be measued. These and other issues should be fitted into the working gruup's agenda.

In later responses, India and others rejected this attempt for the group to expand its own mandate.

In other comments and interventions, New Zealand stressed that any measures that countries wanted to take on environmental grounds could be taken under the GATT "exception" clause and most if not all of them, including some trade restrictions, could be taken without their being discriminatory or protectionist.

Some participants said that the debate or dialogue was still to get under way, and this week's interventions by the developing countries did not result in any dialogue, despite their efforts.

The US, European Community and a few others either did not comment or did not comment substantively.

The major industrialized countries, one participant said, were clearly waiting to "coordinate" their own positions, including their internal differences involving environment and trade sections of government and their lobbies, within the context of the OECD, and only afterwards come before the GATT (and the successor institutional arrangement, whether MTO or GATT-II or by another name, that might emerge out of a successful Uruguay Round).

Till then, the participant said, these countries only want to flag these issues -- whether environment or labour etc -- and put it on the future agenda, and then bring it up at a time more convenient to them.

In the formal and informal discussions and consultations, the Third World countries who participated made clear that they would not countenance concepts like "eco-dumping", "PPM" or "harmonization of standards" being brought on to the GATT agenda, even under the guise of analysis for discussion, and that industrialized countries and their lobbies who push for such an agenda must be clear of the consequences.

The developing countries also rejected attempts to get the committee to expand its mandate to cover all the trade and environment issues in the Agenda 21, and in this process in effect rewrite Agenda 21.

As the Mexican delegate, Amb. Jesus Seade Kuri put it, the entire Agenda 21, including its "trade, development and environment" chapter, had been discussed, negotiated and adopted at the highest levels of government at Rio de Janeiro.

GATT delegates, under the guise of discussing trade-environment linkages cannot sit in judgement over their heads of government and rewrite the Chapter.

One of the delegates explained that the reason why the industrialized countries wanted to focus the discussions in the Ukawa group was that they could more easily confine the debate there to trade-environment linkages and divorce them from the sustainable development linkage. Also most developing countries did not come for these meetings and it would be easier for the countries of the North to manipulate a new debate there. It was unfortunate, he said, that most developing country delegates did not attend such meetings, even though it is open to them. While it is true that many of them have very limited staff, there were no other GATT activities now, and even those from countries whose heads of governments and foreign and trade ministers are voicing their concerns over eco-protectionism, fail to attend or speak up or even say they support the views of those who speak. In the result, some of the industrialized countries feel they could fare better by bringing all discussions into such fora rather than the meetings better attended like the GATT council.

India's Amb. Balkrishna Zutshi in a prepared text, later made available to SUNS, dealt with the conceptual and hidden agenda aspects of the environment-trade debate. He particularly welcomed the group addressing the UNCED followup in terms of its mandate since it helped counter the propaganda of GATT's indifference to environment concerns.

The very title of the Agenda 21 Chapter -- International Cooperation to Accelerate Sustainable Development in Developing countries and related Domestic policies -- underscored three basic concepts: that environmental problems could only be resolved through international cooperation and through global partnership which required overcoming confrontation and fostering genuine cooperation and solidarity.

International cooperation based on consensus provided the underlying philosophy and this necessarily implied "firm rejection of the notion of unilateral action by individual states to resolve the environmental challenges facing international community."

The concept of sustainable development and its trade-environment interface also required, not only a clear definition of the "present generation" but also of its "needs".

Clearly, even the barest minimum needs of survival, leave aside decent living, were not met for a large majority of the people of the Third World and "any unsustainable use of resources" in that context was solely dictated ny needs of survival, while "global resources are being drawn down in an unsustainable fashion to meet the needs, in some cases avoidable needs and in some other even greed, of people in other parts of the world".

The real issue was how to reconcile these two trends, Zutshi said adding, while he did not want to inject any North-South controversy or confrontation in the debate within the group, "there is no gainsaying the fact that the issue has North-South dimension which cannot be overlooked". It raised many difficult and complex issues that did not lend themselves to ny quick-fix solutions.

But any serious examination of UNCED recommendations in the group could not be divorced from consideration of the aspects of sustainable development.

The third idea in the Agenda 21.2 chapter was that it sought to address the problems of developing countries and thus clearly recognized that for these countries the prescription for achieving sustainable development would have to be different from that of others.

UNCED had clearly recognized too that environmental standards valid for developed countries might have "unwarranted social and economic costs" in developing countries.

The GATT Council's mandate to the working group must be viewed in this context. Not all the UNCED recommendations were of relevance to the GATT. Thus, removal or eradication of poverty or financial aid to the developing countries, were not within GATT mandate. Some relating to sustainable development were being discussed in the CTD.

Equally relevant to the group was Principle 12 of the Rio Declaration which emphasized international cooperation and stipulated that trade policy measures for environmental purposes should not constitute a means of arbitrary or unjustifiable discrimination or a disguised restriction on international trade.

The Rio recommendation to make international trade and environment policies to be mutually supportive required clarification of the role of GATT and other international organizations, including conciliation procedures and dispute settlement. There were two aspects to this agenda: market access for developing countries and trade rules to deal with environmental concerns, global or regional.

The objective in market access was to ensure improved access to developing countries and this was also an imperative recognized by sustainable development and protection of the global environment. This required not only that existing barriers should be removed but new ones should not be erected. And more important, trade rules to address environmental concerns should not hinder or impede developing countries from achieving their legitimate development objectives.

While the group was not concerned directly with market access, it had to look at the rules aspect.

Chapter 22.2 in talking of avoiding unilateral actions to deal with environmental challenges outside the jurisdiction of the importing country, emphasised the concept of cooperation among States, implying the multilateral system offered the best recourse to deal with trade-environment interface.

While it recognized that in some circumstances trade measures might be necessary to enforce environment policies, these had to be in accord with rules and principles -- in particular the principles of non-discrimination, least restrictive criteria, transparency and the need to take account of special conditions and development requirements of the developing countries.

All these meant that environmental issues without trans-border effects or spill-over should be left to national authorities and the people of the territory to deal with. Issues with transboundary or spill-over effects should be resolved through international or regional cooperation based on consensus.

The Earth Summit had clearly recognised that environmental standards would be different in different countries. Those valid in the most advanced countries might be inappropriate and of unwarranted social cost to the developing countries.

"Since this is so, my delegate find it unacceptable that trade restrictions may be used to offset differences in costs arising from differences in environmental standards," Zutshi declared, adding: "Indeed, this notion has the potential of putting the multilateral trading system on its road to destruction."

Zutshi also rejected as "equally dangerous" the notion of PPMs (production and processing methods). "The argument that two like products, produced or processed differently but one of which results in apparently greater damage to the environment than the other and hence must be treated differently, if accepted, would put a dagger at the heart of the existing multilateral trading system and, in a relatively short period of time, bleed the system lifeless...This notion will dismantle the two main pillars of GATT, namely of MFN and National Treatment...It will raise numerous questions on such issues as the definition of environmental damage, extra-territoriality and unilateral action, and will go against the letter and spirit of the UNCED recommendations as a whole".

While the perspective of dealing with environment might be somewhat novel, the existing principles and philosophy underlying the multilateral trading system in GATT was sound and of equal and crucial relevance to the debate on trade and environment as to any other trade policy issue.

Brazil's Jose Graca Lima, who also spoke from a text and later made it available, said the principles in the Rio Declaration and in Agenda 21, though not drafted with the idea of being "legal language" had clear meanings that should not be reduced or expanded. The linkages at Rio of the environment and development perspectives was an important progress. A consequence of this, for the group, was for the integration of trade, environment and development.

The Rio Summit had underlined cooperation and recognized that some environmental problems would have transboundary effects and others would have global effects, and international cooperation was needed to tackle them. Rio also recognized that many other development problems were diverse in nature, not only due to diverse ecosystems, but also the different relationships between man and his environment.

Environment problems of the developed world stemmed from affluence, while that of the developing world came from poverty, the greatest polluter. Hence the Rio language of need for more international cooperation, new global partnership and continuous and constructive dialogue or fostering of a climate of genuine cooperation and solidarity.

It was hence natural that 22.2.B came out against unilateralism and extraterritoriality, a view found too in other chapters and instruments of Rio and in the Rio declaration itself. Unilateralism and extra-territoriality covered with a veil of suspicion and resentment the dialogue on environment and development and impeded the search for real solutions. Unilateral measures against the developing countries for environmental reasons had a negative effect on their development perspectives and thus on environment while extra-territorial measures, besides imposing social preferences of one society over that of another, disturbed the determination of priorities in terms of environmental protection and, by not taking account of differences in environmental problems, tended to be unwarranted.

The third basic message of Rio was to address the root causes, and not the symptoms, of the environmental and development problems. To deal with root causes, options of cooperation -- including in relation to developing countries transfer of resources and technology -- were preferable to restrictive trade measures.

The commitments undertaken by developed countries in Rio should hence not be weakened and governments should beware of use of environmental motto by their protectionist lobbies.

And should trade policy measures be found necessary, as stipulated in Agenda 21, the rules and principles, not unfamiliar to GATT should apply. It was not by chance that the Rio document had borrowed the language of Art X and this recognized the effectiveness of GATT in allowing legitimate measures to protect the environment to be taken while barring protectionism.

A great number of measures to protect the environment could be taken without violating any GATT rules and Art X enabled measures to be taken, even in contradiction to the GATT obligations, once the criteria set out were established.

The Brazilian delegate favoured the usefulness of clarifying the criteria set out in Art X through an interpretation, which should be made in the light of the principles in Agenda 21.

Seade, for Mexico, also referred to the "international cooperation" aspect of dealing with environment problems having a transboundary effect and underscored that this ruled out "unilateralism" or "extra-territorial actions". Seade also rejected the concept of "harmonization" or of compensatory actions and duties to restrict competing imports.

The Agenda-21, the Mexican delegate said, laid major stress on global partnership and international cooperation to resolve trade, development and environment questions. Environment problems with purely local or internal effects must be left to be resolved within the country, and any country would do so taking into account how useful it would be for it and in a manner affordable. International cooperation such as technical cooperation and financial aid could play a role. But problems with transboundary effect would need to be resolved through sub-regional, regional and international cooperation and agreements and not through unilateralism.

Agenda-21 also called for actions against the root causes of environment degradation which in the developing world called for actions against poverty, whereas trade measures could only deal with symptoms. Improved market access, financial resource transfers and technology transfers could also help in dealing with the root causes.

The idea of harmonization of environment standards might appear sound and good, and could be feasible among a particular range of countries with a similar situation and positions. But it could not be done globally nor would it be appropriate to set the same targets.

In a reference to the arguments about "eco-dumping" and the suggestions that goods produced under different standards should be compensated or countered through anti-dumping or other compensations, Seade wondered why only differing eco-standards would need to be treated like this. The costs of production or even profitability of enterprises might differ because of differing levels of taxation in countries. Should the differing levels of taxation also be compensated through border taxes, with products from countries with lower tax levels hit more?