Beyond the WTO: Finding Appropriate Homes for the Issues of Trade and Sustainable Development

By Aaron Cosbey, Research Officer, and and Nevin Shaw, Executive Interchange Fellow International Institute For Sustainable Development

Prepared for the "Trade and Environment Conference", Pacific Basin Research Center Kennedy School of Government, Harvard University, April 29 - 30, 1994.

Contents:

• Introduction
• Sustainable Development as a Starting Point
• What the WTO Can and Cannot Do
• What Should the WTO Do?
  
• What Else Must Be Done?
• Conclusion
• References
• Footnotes

Introduction

On April 15 1994, the trade ministers of over 100 countries gathered in Marrakech, Morocco, to sign off on the results of the Uruguay Round of multilateral trade negotiations -- the most comprehensive set of world trade talks to date. They also approved a programme of work to guide the future efforts of the new World Trade Organization (WTO), the new institutional framework embodying the General Agreement on Tariffs and Trade (GATT) and other trade-related accords.

One aspect of this programme of work, hotly negotiated in Geneva in the months leading up to Marrakech, details how the WTO will deal with the issues of trade and the environment. The GATT had previously set up a Working Group on Environmental Measures and International Trade, which convened for the first time in 1991, nearly twenty years after it had been established. As its name suggests, its mandate was to examine the effects of environmental measures on trade, and not the impact of trade rules on the environment -- a subject considered outside the mandate and competence of the GATT. It focused on three issues:

• trade provisions in Multilateral Environmental Agreements (MEAs);
• the transparency of trade-impacting national environmental regulations; and
• the trade effects of new packaging and labelling requirements aimed at protecting the environment.[1]

As a result of the Marrakech agreement, there will now be established a WTO Trade and Environment Committee, a step up from the Working Group status, broadly charged with laying out how to ensure better policy coordination and multilateral cooperation over the linkages between trade and environment, with a view to promoting sustainable development.[2]

In the two years prior to the first meeting of the WTO's General Council, the work of the Committee will be carried out by a sub-committee of the WTO's Preparatory Committee. The new Committee will be charged specifically with addressing:

• the use of trade measures for environmental purposes,
• environmental measures with significant trade effects (these two are often lumped together as trade-related environmental measures, or TREMs),
• charges and taxes for environmental purposes,
• environmentally related packaging and other requirements,
• transparency obligations with respect to TREMs,
• available dispute settlement processes,
• the effect of environmental measures on market access and
• the environmental benefits of removing trade restrictions and distortions.

As well, the Committee will carry out the trade and environment work envisaged as part of the Decision on Trade in Services and the Environment, and the Agreement on Trade-Related Aspects of Intellectual Property Rights.[3]

The scope of the Committee's activities is commendable, and should contribute positively to ensuring greater compatibility of the multilateral system of trade, protection of the environment and promotion of sustainable development. Real progress, of course, will depend on a number of factors, including the political will of the countries involved as the programme of work unfolds. The wording of the draft decision is sufficiently flexible that any a priori judgement on the potential effectiveness of the Committee would be premature. It is, however, regrettable that there is no attempt to spell out the relationship between the Trade and Environment Committee and the Committee on Trade and Development, whose work on UNCED follow-up and related areas is obviously relevant. This is discussed in greater detail below.

The programme of work spelled out for the Committee fails to address a number of critical issues, mostly relating to the effects of trade on the environment and sustainable development. This is as it should be; the WTO, it is argued below, is not the proper forum for tackling such issues. The Decision on Trade and Environment being particularly silent on how the Committee will relate to other organizations,[4] it falls to others to help establish where and how the various "residual" tasks should be dealt with. This paper takes a first step in that direction, by laying out what tasks are appropriately addressed by the WTO, and what other tasks are necessary to help ensure that trade, and trade-related environment and development policies work together to achieve sustainable development. The next step, outlining what institutions are best suited to tackle which tasks, and what new institutions or linkages need be created to ensure that all are dealt with, is left for subsequent discussion elsewhere.

Sustainable Development as a Starting Point

The 1992 United Nations Conference on Environment and Development (UNCED), like the Report of the World Commission on Environment and Development (The Brundtland Report) before it, made it clear that we can no longer consider environment, economic and social development policy objectives separately. The Rio Declaration suggests that environmentally compatible economic development will only occur if countries establish a genuine and continuously supportive, cooperative and equitable global partnership involving governments, their people and key sectors of societies to implement essential multilateral agreements which better respect the integrity of our natural environment. Agenda 21 points out that the only way to achieve this is to address environment and development concerns at the same time, noting that economic policies of individual countries and international economic relations both have great relevance to sustainable development.

It is important to recall that concern over sustainable development arose from the growing judgement that a planetary increase in production and consumption to meet the expected several fold increase in demand was simply unsustainable. The need for altered production and consumption patterns and a reallocation of resources had to be collectively and equitably addressed. UNCED parties agreed that this would generally require an open, equitable, secure, non-discriminatory and predictable multilateral trading system. They also warned against the use of trade restrictions or distortions as means to offset differences in cost arising from differences in environmental standards and regulations. Further, they agreed to shun unilateral actions to deal with environmental challenges outside the jurisdiction of the importing country, opting instead for international cooperation.

Such international cooperation was seen as essential not only to fostering needed development in the world's poorer countries, but also to fostering cooperation on environmental issues of shared concern. The heads of state that signed Agenda 21 agreed to take action on such issues as sustainable agriculture and rural development, sustainable management of fresh and ocean waters, conserving biological diversity and protecting the atmosphere. They pledged to better manage their treatment of hazardous and radioactive wastes and toxic chemicals. And they agreed to work to combat deforestation and desertification.

Finally, it was agreed that the means of implementation would have to involve not only extensive domestic reforms, but also international assistance programs for developing countries in areas such as economic development, improved market access and commodity prices, technology transfer, financing (debt relief, foreign investment, official development assistance) and institutional capacity building. Without such efforts, Agenda 21 warned that many developing countries would be unable to effectively pursue the environmental element of the "Rio bargain."

In the context of the ongoing debates between the trade community and the environmental community, the relevance of the messages from Brundtland and Rio is that sustainable development should become a common objective -- a necessary common frame of reference which can be used to analyze the issues and evaluate policy. The promise of sustainable development, while it may be unwieldy and ill-defined, is that it forces a broadening of perspectives: trade policy-makers must be concerned about environmental impacts, makers of environmental policy must be concerned about trade impacts, and both must question the impacts of their policies on impoverishment and equity, within and between nations. In a world characterized by growing economic and environmental interdependence, such an integration is essential.

We believe that profound changes in world economic and environmental relations are needed if trade is to better contribute to sustainable development. These changes should be based upon a commonly agreed set of indivisible principles from which new rules, agreements and conventions can be derived over time. The International Institute for Sustainable Development (IISD) released its Trade and Sustainable Development Principles in February to suggest new ways to define and address shared concerns of the trade, environment and development communities.[5] These Principles are an interlinked set, in line with the spirit of the Rio Declaration and Agenda 21. They are:

• Efficiency/Cost Internalization: progressive internalization of unpaid environmental costs in the prices of goods and services, and trade liberalization, to improve efficiency.
• Equity: trade liberalization and other critical proactive measures to promote equity today and tomorrow (additional market access, building capacity to manage the environment, debt relief, funding, investment and technology transfer).
• Environmental Integrity: special efforts to respect and help maintain the regenerative capacity of ecosystems, avoid irreversible harm to plant and animal populations and species and protect designated parklands (where such efforts require the use of GATT-inconsistent trade measures, they should be within the context of prior internationally agreed criteria).
• Subsidiarity: implementation of environmental measures at a jurisdictional level appropriate to the geographic scope of the problem, and cooperative efforts to this effect where there are significant transborder impacts.
• International Cooperation: better international cooperation across the board, as well as more open, effective and impartial dispute settlement procedures.
• Science and Precaution: balancing the magnitude of potential environmental damage and the risk of its occurrence against the cost of preventing it, and adopting a precautionary and adaptive policy approach based on objective factors.
• Openness: timely, easy and full access to information by all affected or interested parties, and public participation and accountability in the decision-making process.

The most serious tensions between trade and environmental policy arise where there is trade among nations of widely disparate stages of development, and the issues that ensue tend to be the most difficult to treat through multilateral agreement. Until we can link progress in dealing with the underlying problems of development to progress in addressing shared environmental concerns, there will be no satisfactory resolution to the issues of trade and environment. For this reason the above principles - - which balance the objectives of economic growth, development and protection of the environment -- need to be applied to the implementation of the WTO work programme on trade and environment.

What the WTO Can and Cannot Do

At a general level, the terms of reference for the new Committee on Trade and the Environment direct it to carry on where the GATT's Working Group leaves off, by examining the impact of environmental measures on the trading system. There are some notable differences; for example, the stated aim of the Committee's work in identifying the linkages between trade measures and environmental measures is "to promote sustainable development". But in general the focus remains on how environmental concerns, expressed in the form of regulations or agreements, might affect the integrity of the multilateral system of trade.

As with the Working Group before, many have argued that such terms of reference are too narrow -- that they leave out half of the equation. As well as examining the impact of environmental measures on trade, the argument goes, the Committee should also be examining the impact of trade on the environment.

There are several reasons to hope that such arguments do not prevail. The first is that the GATT's competence and sympathies do not lie in the area of protection of the environment. Those Ambassadors to the GATT who will make up the Committee are tasked by their governments to protect and promote trade interests. The GATT Secretariat staff, made up primarily of trade economists and trade lawyers, in turn serve the Ambassadors. Both groups have repeatedly made clear their wish to avoid environmental issues, beyond tracking how they might affect the trading system and addressing incompatibilities between trade and environmental measures.

This is not to say that the GATT Contacting Parties should not take into account the effect of trade rules on the environment. If it is established, for example in the work of organizations such as the World Intellectual Property Organization, that some aspects of the new trade rules on intellectual property rights are detrimental to sustainable development, then the proper forum for dealing with that finding is the WTO, where trade rule changes might be negotiated. But the proper forum for establishing the nature of the environmental problem in the first place, if it involves the WTO at all, should involve it as only one of a number of partners.

It is thus entirely appropriate that the WTO's Trade and Environment Committee continue the narrow approach initiated by the GATT Working Group, but it is also imperative that the necessary institutional linkages be established to treat the "wider" agenda elsewhere. And it will certainly be necessary for the WTO to formally take account of such work. Just as the drafters of trade-related environmental measures should take account of the GATT Committee findings, to improve the compatibility of their rules with the international trading system, so should the representatives of GATT Contracting Parties take account of findings that trade rules might impair achievement of sustainable development.[6] The language in the proposed Decision leaves to the interim Sub-Committee the crucial task of proposing arrangements for relations with inter-governmental and non-governmental organizations.

In considering what tasks should rightly be taken on by the WTO Committee, and which should take place elsewhere, it is useful to review briefly just what the GATT/WTO is, and what it can and cannot do. The GATT/WTO is a collection of Contracting Parties -- governments which have come together and agreed to abide by a certain set of trade rules of conduct establishing, in effect, a constitution for international trade. Governments, after the experience of the depression, deliberately chose to develop such a constitution, embodying a legal means for establishing principles for the conduct of trade, a forum for negotiating trade liberalization and a mechanism for trade policy notification, consultation, dispute settlement and review.

The first point to be made, then, is that the GATT/WTO is incapable of doing any more than those governments collectively want it to do. For example, while it might be highly desirable, from a sustainable development viewpoint, to reduce the types of agricultural protectionism that overexploits lands in industrial countries and works against the agrcicultural sectors of developing countries, the GATT/WTO would not be the proper target for venting frustration over how little has been done on this front. The proper pressure point is the governments of those countries which have frustrated most GATT attempts at liberalization in these areas -- largely the U.S. and E.U.

The second point is that the GATT has no mandate in, and is therefore not competent in, matters of the environment. It thus should be in the business neither of determining the legitimacy of environmental standards, nor of judging whether or not the economic costs of TREMs are proportional to their environmental gains. The GATT should not be asked to decide, for example, whether or not reducing packaging waste is a legitimate environmental goal. In deciding whether the costs of a TREM used to achieve such a goal are proportional to the gains, the GATT should determine what the costs might be in terms of disruption to trade flows, but cannot be asked to estimate what the benefits might be in terms of environmental protection. Such analysis must come from elsewhere, whether from the governments involved or from the research of other organizations.

The GATT can work to facilitate trade-related negotiations to alter tariff structures or to change the rules of the game. In the present context, it might do so on the basis of approval of findings by its committees or by others that current trade rules in some way frustrate sustainable development. As well, it can clarify the intent and scope of existing rules as they apply to sustainable development issues. It can also monitor and analyze trends in environmental regulation that might have trade impacts, with particular attention to those likely to disadvantage developing countries. Along the same lines, the GATT can -- indeed, is mandated to --question environmental regulations where they result in unjustifiable discrimination against foreign producers.

What Should the WTO Do?

Given the role of the GATT/WTO, as described above and as interpreted in the Marrakech decision on trade and the environment, what are the tasks that should properly be left to the WTO to pursue? It should be noted that, even on such tasks as are clearly within its own jurisdiction, the WTO should seek outside input from such places as IBRD, IMF, UNEP and UNCTAD, just as UNEP, for example, seeks GATT input when drafting trade measures to accompany MEAs. It should also be noted that the efforts of the current GATT Secretariat on trade and environment are limited by tight human and financial resources, and these limitations will have to be addressed if the Committee is to effectively tackle the agenda it has set itself, much less do so in the spirit of openness which, while vitally necessary, requires the investment of a great deal of time and energy.

At the outset, the WTO should seek to define a starting set of principles that will guide makers of trade policy and trade-related environment and development policy, to ensure the promotion of its stated objective: sustainable development. This would provide a commonly-agreed framework from which to proceed, and would make subsequent efforts to deal with the issues that much easier. IISD's work on principles might be taken into account, as should the work of the OECD Joint Experts group and of UNCTAD. We believe that without such a starting point, the issues of equity and fairness will be marginalized in the efforts to accommodate the very necessary environmental agenda, which would be in nobody's long term interest. And adopting certain principles of practice, such as Openness, may greatly increase the efficacy with which all other issues are addressed.

The role of the WTO on trade and sustainable development issues was defined in broad terms above to consist of three elements:

1. Monitor and analyze trends in environmental regulation likely to have significant trade impacts.
   This would include such items from the draft work programme as monitoring domestic trends in product standards regulations, including standards and technical regulations, packaging, labeling and recycling. As well, it would include other Committee responsibilities such as monitoring the trade impacts of charges and taxes for environmental purposes, and monitoring the multilateral transparency of environmental measures with significant trade impacts. Such efforts might sensibly become a standard part of the Trade Policy Review Mechanism, which could expand to focus on trade-related environmental measures employed by Contracting Parties.
2. Clarify/expand, where necessary, on current trade rules relevant to sustainable development.
   This might involve several broad areas of endeavour. First, there needs to be clarification of the scope for use of trade measures to pursue environmental and development goals. This would involve both detailing how environmental and development objectives might be met in ways that conform to existing rules [7] , and providing elaboration on the intent and purpose of rules whose application is controversial (e.g., the Article XX (g) exception relating to the conservation of exhaustible natural resources). Second, there needs to be clearer understanding of what constitutes a legitimate MEA, and what types of accompanying trade measures are acceptable in what circumstances.[8]

   This topic has been explored in general terms at some length by the GATT Working Group, but the language in the draft work programme does not suggest the discussion in the WTO Committee will be any more focused on identifying specific criteria for MEAs or the trade measures they may contain. Third, there needs to be a clearer understanding of the scope for unilateral, extrajurisdictional TREMs, a discussion often referred to under the broad heading of PPMs. On this topic, the WTO Committee should again be seeking specific criteria of acceptability -- spelling out under what circumstances, and after exhausting what other avenues, there should be allowance for which types of measures.[9]

3. Facilitate negotiations on changes in tariff structures and rules of conduct which better foster sustainable development.
   Approval of actions of this nature could be prompted by findings, whether by WTO Committees or by other organizations, which indicate ways in which trade rules could better serve sustainable development. For example, if WTO investigation identifies ways in which current rules on exports of domestically prohibited goods might result in harm to environment or development in developing countries, the Contracting Parties should act on that information to change the rules accordingly.

   Similarly, the WTO should establish formal mechanisms to respond to such findings from outside its own Committees; the point was made earlier that identifying the environment and development effects of trade rules might not be the WTO's responsibility alone, but that its role was to act on any findings or recommendations in its area of competence. For example, the draft work programme contains a recommendation that the Committee address the "environmental benefits of removing trade restrictions and distortions", perhaps in reference to such things as escalating tariffs and agricultural protection in industrialized countries. We have argued that actually determining such benefits is not an appropriate role for the Committee, but we see it as entirely appropriate for the Committee to address the findings of others (perhaps arrived at through cooperation with the WTO ) by recommending negotiations to reduce such barriers to trade.

4. Address issues of trade, environment and development.
   We have elsewhere argued that the WTO Committee on Trade and Environment should in fact have been an amalgamation of the GATT's Working Group on Environmental Measuresand International Trade and it's Committee on Trade and Development. The GATT Committee on Trade and Development, slated to continue its efforts under the WTO, has discussed the interface between trade, environment and development, the relevance of trade rules to the interface; and improving market access.

   It proposes a programme to achieve sustainable development by addressing such issues as differences in consumption and need; the relationship of poverty to environment, technology, trade liberalization, funding and compensation for the provision of environmental services; avoiding environmental measures which distort trade; and improving market access for new environmentally friendly goods and services through removal of trade barriers and tariff escalation.

Failing the creation of an integrated body, we see the relationship between the two Committees as central to the WTO's efforts to promote sustainable development. It is only in the context of their interplay of responsibilities and ongoing research that there can be effective follow-up to the recommendations of Agenda 21 within the WTO. For example, the relationship between the two Committees should ensure that any changes or clarifications of trade rules which entail new environmental responsibilities for developing countries should be linked to such complementary measures as improved market access for developing country goods and services, or measures to address deteriorating terms of trade in commodities.

What Else Must Be Done?

The previous section describes a comprehensive role for the WTO to ensure that trade rules can best serve the needs of sustainable development. But there are a number of other tasks which will also have to be tackled, if trade and trade-related environment and development policies, practices and agreements are to work together toward that goal. In what fora they will be addressed has been a topic of much discussion. Some have proposed an new overarching environmental organization to handle all such "residual issues".[10] Others favour a grouping of existing organizations and researchers in a structure similar to the Intergovernmental Panel on Climate Change, which addressed science and policy questions regarding global warming.[11] Others favour loose groupings of institutions tailored to specific aspects of the trade-sustainable development problematique.[12]

A prerequisite to designing the structure is a careful catalogue of the issues with which any such structure will have to deal. These fall into four broad categories:

Scientific and Policy Research.

Several types of research are needed. First, there needs to be investigation of the effects on sustainable development of current and proposed trade policies and regimes. It was argued above that, while the WTO needs to address the sustainable development effects of trade rules, -- and, in fact, may be mandated to do so in specific cases [13] -- determining those effects has to be the work of other organizations. Specifically, we need to know far more about the sustainable development effects of:

• the new rules on trade in services
• the new rules on trade-related intellectual property rights, especially in terms of technology transfer and preservation of biodiversity
• trade in domestically prohibited or hazardous goods
• industrialized country escalating tariffs and non-tariff barriers
• industrialized country subsidization of agriculture commodity markets as they currently function.

As well, there is an urgent need for more research of the type that would eventually lead to life-cycle analysis and full costing of a wide range of traded goods. More data is needed, especially on regional bases, on ecosystem dynamics, capacities to absorb pollution, and the types of environmental damage incurred by various polluting and depleting activities. There also needs to be more work on methodologies for costing such effects, and translating them into meaningful full-cost prices.

Finally, there will be a need for research on the state of the global environment, to support efforts at Multilateral Environmental Agreements. Such research should strive to demonstrate the precise nature and degree of urgency of the matter at hand, and to predict the consequences, in terms of both efficiency and equity, of various policy options for treating it. Much of the difficulty in achieving multilateral environmental agreements stems from ignorance, or differences of scientific judgement, which contribute to differing prioritization of environmental problems.[14]

It should also strive to predict the types of risks associated with the uncertainty of knowledge in any particular case. For example, what are the environmental risks of being wrong on our predictions of the effects of increased atmospheric loading of carbon dioxide? This research will be needed first as the possible basis for any multilateral efforts at agreement, and second as the possible basis in part for any WTO waiver of MEAs using discriminatory trade measures for enforcement. More generally, it will be needed to help prioritize the urgency and magnitude of environmental problems. Whether in the form of MEAs or domestic regulatory efforts, cost internalization will have very different international distributions of costs and benefits depending on which issues are tackled first. It is therefore critical to have a sound scientific basis for prioritization.

Capacity building

This may be one of the most important areas of need. The point was made earlier that many developing countries have a serious lack of capacity to deal with issues of environment and development. While Agenda 21 lays the responsibility for environmental and economic improvements squarely on the shoulders of domestic governments, it also commits richer countries to international cooperation and financing to help poorer countries achieve those improvements. And recent Agenda 21 follow-up on technology, financing and trade has fallen far short of the mark [15]. Until there is satisfactory effort in this area, there will not be any meaningful resolution of the current trade-environment tensions.

Many areas need to be addressed. In terms of financial capacity, the majority of developing countries are being pressed by external debt and low foreign reserves, and simply lack the money to create environmental ministries, enforce environmental law, conduct environmental research, encourage the development and adoption of environmentally-friendly technologies, etc. The need is for greater efforts on debt relief, debt swaps, targeted lending from private and multilateral sources, concessional financing, and more instruments like the multilateral fund of the Montreal Protocol and the Global Environmental Facility. Developed country governments need not only to meet the official development assistance commitments made at Rio, but also to re-direct their existing assistance towards sustainable development.

In terms of technological capacity, the need is not only for new environmentally-friendly technologies imported from the North, but also for efforts to foster indigenous development of technologies appropriate to local needs, and for better matching of those needs with whatever technologies are imported.

In terms of human resources, many developing countries lack individuals trained in either natural resource management, in drafting and administration of environmental law, or in the negotiation of MEAs. Training programs, tailored to local needs, should be established to share expertise gained by countries which have rich experience in these areas. There is a similar need in many countries for training of natural scientists (ecologists, biologists) and social scientists economists, sociologists) to deal with the issues of trade and sustainable development.

In terms of capacity to fully exploit growing "green" market opportunities, there is a need to promote a much greater interministerial and public/private sector dialogue to:

• promote exports of envirnmentally friendly products.
• identify "green" market trends, and the products and processes by which to exploit them.
• improve collection and dissemination of information on relevant environmentally-based regulations in major markets, and make representations abroad to ensure the right to participate in such markets.
• absorb and use such information to adjust production methods and conduct training where necessary.

Finally, there is a need for assistance in designing and implementing public awareness programs. Governments cannot move far on dealing with issues of sustainable development without the support of their people. In some cases (especially those with immediate and local impacts) the people may be more aware than their governments of the nature of problems. But this is not true in all cases, and there is a greater need for education the further away in time and space the impacts of an environmental problem are felt.[16]

Coordination of international initiatives.

Two areas of endeavour are particularly necessary in the current context. The first involves facilitating MEAs. This must be done on both a reactive basis (responding to an expressed need by a number of countries) and a proactive basis (identifying acute problems, and working to get international agreement on how to deal with them). Agreements should be both the traditional type, involving regional or multilateral government-to-government efforts, as well as innovative efforts to achieve sector-by-sector agreements on such things as process standards.

Such new types of agreements might involve producers talking to producers, or producers talking to consumers, and might not need to involve government in more than an advisory capacity. They may, in fact, more closely resemble a commodity pricing agreement than a MEA. Many have suggested that such new forms of international cooperation will be necessary prerequisites to cost internalization in sectors where price competitiveness is a key concern -- particularly for intermediate good commodities such as metals, minerals, chemicals and forest products.

The second area in need of proactive coordination is eco-labelling. The needs here are many and diverse. Drafters of domestic schemes need fora in which to consult with affected parties on the structure and nature of their regulations, and in which to advise potential exporters of the standards in place. The process should ensure that foreign suppliers will have the opportunity to participate in the development of labelling schemes, and will be able to obtain certification without unjustified discrimination. Such a forum could have, for example, averted the trade row that arose when Austria attempted to unilaterally set up a labelling scheme for tropical hardwood.[17] As well, affected parties need a forum in which to keep informed of such standards as they develop, and in which to protest if they find that their interests are being ignored by others. And the international community needs a body which will actively seek to achieve mutual recognition and some types of harmonization among a growing multitude of differing national requirements.

A plethora of unrelated national standards presents a significant barrier to potential exporters trying to capture a green market, and thus puts a damper on not only economic development, but also "green" innovation. Multi-market exporters and small exporters are particularly vulnerable. UNCTAD is doing pioneering work that brings the relevant agencies, practitioners and researchers together, and there is some hope that the fledgling practitioners' organization (World Eco-labelling Network) might evolve to fill the institutional vacuum.

Direct support for the WTO

Of course, all of the tasks described above will be of value to the WTO in its efforts to deal with issues of trade and sustainable development, and in most of those initiatives the WTO should probably be represented as cooperating partner or expert advisor. There are a number of additional supporting tasks in which outside institutions, or institutional links, will need to play a direct role.

There will be a need for a roster of environment and development "experts" to serve on WTO dispute panels. The new rules on dispute resolution make such outside participation a possibility, and it is to be expected that the WTO will use the opportunity when appropriate. As well, again in the context of dispute resolution, the point was made above that the WTO is not the appropriate body to determine the legitimacy of domestic environmental measures, nor can it determine, in the course of considering a measure's proportionality, what its environmental benefits might be. These are tasks which must be tackled for the WTO by independent expertise. Finally, the WTO might need to make use of similar contributions on legitimacy and proportionality if it broadens the scope of the Trade Policy Review Mechanism, to focus on the trade effects of environmental policy.

Conclusion

This paper is designed to begin addressing a fundamental asymmetry. The GATT, and in the near future the WTO, constitutes a global framework for addressing issues of international cooperation on matters of trade. We may soon see the formation of a partnership for economic management on an even more integrated scale; there are those in the GATT who see the eventual establishment of the triumvirate that was long ago envisioned at Bretton Woods, to link the IMF, the World Bank and the WTO.[18] There is thus a growing multilateral structure, albeit unwieldy and short on consensus, to address the ways in which environmental policy might impinge on trade flows and the global economy.

There is no equivalent structure to deal with the other side of this equation -- to address the ways in which the multilateral trading system might frustrate the achievement of sustainable development. In fact, in light of the diversity and scope of the issues that fall under this broad heading, and taking into consideration the work of this nature already underway in a number of organizations [19], it is probably undesirable to strive for an equivalent single structure. And we have argued strongly that such issues should not be the purview of the WTO. Rather, there needs to be a diversity of approaches, tailored to the various necessary tasks. The heart of the asymmetry, and the threat to sustainable development, is that the institutional structure to facilitate such efforts is not in place, and will be difficult to create and manage. Without concerted attempts to remedy this situation, the issues of trade and sustainable development will not be addressed by the international community in the balanced manner they deserve.

We have tried to take the first step by describing the work that needs to be addressed outside the WTO structure, and the ways in which new and existing institutions might work with the WTO to support its efforts in areas where it is short of expertise. The next step will be to define what organizations are capable of handling the various tasks, and establishing the necessary institutional linkages. There is scope within the terms of reference for the interim subcommittee to make proposals for such institutional linkages. If we are to have trade, environment and development working together to support sustainable development, such efforts will have to begin now.

References

Esty, Daniel C. Greening the GATT: Trade, Environment and the Future. (Forthcoming) Washington: Institute for International Economics.

IISD. Trade and Sustainable Development Principles. Winnipeg, Canada: International Institute for Sustainable Development. 1994, pp. 32.

Natural Resources Defence Council/Foundation for International Environmental Law and Development. Green Reform of the World Trading System: A Framework for Action. February 1994, mimeo.

Shaw, Nevin and Aaron Cosbey. Positioning GATT's Trade and Environment Work Programme to Support Sustainable Development. IISD Trade Program Working Paper, April 1994.

Peter D. Sutherland. "Global Trade -- The Next Challenge", News of the Uruguay Round of Multilateral Trade Negotiations, NUR 082 28 January, 1994.

Third World Network. The World Trade Organization, Trade and the Environment. March, 1994. mimeo.

Wirth, Timothy. Testimony before the Subcommittee on Foreign Commerce and Tourism Committee on Commerce, Science and Transportation, United States Senate. February 3, 1994.

World Wide Fund for Nature International. The GATT Trade and Environment Work Programme. WWF Position Statement, January 1994.

Zutchi, Ambassador B.K. Keynote Address at the International Conference "Striking a Green Deal". Environment and Development Resource Centre, Brussels, 7 November, 1993.

Footnotes

1 - See "Report by Ambassador H. Ukawa (Japan), Chairman of the Group on Environmental Measures and International Trade, to the 49th Session of the CONTRACTING PARTIES." 25 January, 1994.

2 - Trade Negotiations Committee. Trade and Environment Draft Decision. MTN.TNC/W/123, 13 December 1993; Communication from the Chairman: Decision on Trade and Environment, MTN.TNC/W/141, 29 March 1994.

3 - See Communication from the Chairman: Decision on Trade in Services and the Environment, MTN.TNC/W/140, 29 March 1994.

4 - The sub-committee is invited to submit, at the time of the establishment of the full Committee, suggested arrangements for relations with intergovernmental and non-governmental bodies, as referred to in Article V of the WTO.

5 - See IISD (1994).

6 - In many cases, the drafters of TREMs and the relevant Contracting Party representatives are serving the same governments. This highlights the fundamental need for better policy coordination and cohesion within country capitals.

7 - It is a commonly-held tenet of the trade community that most, if not all, environmental goals can be met in ways that do not violate current trade rules -- that is, in ways which do not distort the international system of trade -- and that most development goals can be met by growth induced by trade liberalization (see, for example, Zutchi, 1993). The environment and development communities, for the most part, do not concur. The trade community should make their case in more detail since, were it accepted, it would lead to a great diffusion of tensions and, were it refuted, it would point clearly to the areas where more discussion is needed.

8 - For a more detailed discussion of what is needed in this area see Shaw and Cosbey (1994).

9 - See Wirth (1994) for an initial attempt at such a discussion, albeit one which is too general to be acceptable to most GATT Contracting parties. See also Shaw and Cosbey (1994).

10 - See Esty (1994).

11 - See NRDC/FIELD (1994).

12 - See WWF International (1994).

13 - The draft Decision on Trade in Services and the Environment (MTN.TNC/W/140, 29 March 1994) asks the Committee on Trade and Environment to report on the adequacy of the exceptions to the Agreement on Trade in Services, "with recommendations if any, on the relationship between services trade and the environment including the issue of sustainable development." As well, the draft Decision on Trade and Environment (supra at 3) asks the Committee to address "the issue of exports of domestically prohibited goods" which, presumably, will involve endeavouring to understand how such trade affects sustainable development.

14 - In that context, the research work of the Intergovernmental Panel on Climate Change was a necessary prerequisite to agreement at the United Nations Conference on Environment and Development on the Convention on Climate Change.

15 - See Third World Network (1994).

16 - This same dynamic, of course, works equally in developed countries.

17 - See ****.

18 - See Sutherland, 1994.

19 - Trade and sustainable development activities are currently underway in, inter alia, UNCTAD, OECD, UNEP, UNDP, the World Bank, and an ever-growing number of environment, development and business NGOs worldwide.