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This article is written by Shubhangi Jain, a student from the School of Law, UPES Dehradun. This article deals with the Trade and Environment, International treaties on Climate change and their relation to trade.

Introduction

Around the world, scientists, political representatives, and civil societies have recognized climate change as a “threat multiplier”. It’s not only a major environmental problem but also a major development issue. The reason behind this is that climate change poses challenges that affect the entire world on various levels. Various reports have already shown that if the temperature continues to rise at such a significant rate then it is a threat not only to the ecosystem but the survival of humanity.

Intergovernmental Panel on Climate Change’s (IPCC) 4th Assessment Report, 2007 provided the most comprehensive analysis of the serious and potentially catastrophic effects of climate change, especially if the average global temperature increases beyond 2 degrees Celsius above the pre-Industrial Revolution level. The same was reiterated in the 5th Assessment Report released in 2014 which clearly underlined the dire changes taking place in oceans, glaciers, and ice-deposits on land and sea. It also summarizes the disastrous impacts of warming based on current projections of global greenhouse gas emissions. Climate change poses a threat to not only the environment but also Human Development. It is important to tackle the threat on both fronts. While tackling the latter, the most important issue is the linkage of climate change policies with Trade policies. The developed countries put forward the idea of using trade policies to tackle climate change but were soon shot down by being a mode of increasing “economic competitiveness”. The other main issue while tackling climate change and trade policy is Intellectual Property Rights. The developing countries have been pushing for access to the innovative technology at an affordable cost which will be a crucial element for mitigation of and adaptation to climate change.

This article will attempt to shed light on various International conventions related to trade and the environment and will also address the two main issues mentioned above.

Major International treaties on Climate change and their relation to trade.

It is now widely accepted that Climate change is not only an environmental issue but a development issue as well and if drastic measures are not taken to tackle the issue, the world will have to face catastrophic consequences.

Many discussions are taking place on the issue of various international forums. Many treaties have also been signed regarding the same. The major negotiating forum is UNFCCC (The United Nations Framework Convention on Climate Change). UNFCCC and its Kyoto Protocol are unique because this convention lays down various development principles of common but differentiated responsibilities. One of the major aspects is that although both developed and developing countries have obligations to take action to deal with climate change, the nature of their obligations is different.

Article 4.5 of UNFCCC on technology says that developed countries shall take steps that are practical to promote, facilitate and finance, as appropriate, the transfer or access to eco-friendly technologies particularly to developing countries to help them implement the provisions of the convention. It also mentions other parties and organizations who are in the position to assist may facilitate the transfer of such technologies.

Article 4.7 of UNFCCC says that the extent to that developing countries implement their commitments underneath the Convention can depend upon the effective implementation by developed countries of their commitments associated with monetary resources and technology transfer, and can take absolutely under consideration that economic and social development and financial condition demolition are the primary and paramount priorities of developing countries.

Under the Kyoto Protocol (which was established in 1997), solely developed country parties are obligated to form binding commitments to scale back their greenhouse emission emissions. The Kyoto Protocol has two mandate periods, the first commitment period of 2008 to 2012 and the second one starting from 2013. Specific and separate goals have been set for a commitment period.

The developing countries do not have to undertake legally binding emission reduction commitments under the Kyoto Protocol.

It is important to realize why the developed and developing countries have been treated differently when it comes to assuming responsibility under the UNFCCC and Kyoto Protocol.  The main responsibility is put on developed countries because ultimately, they are the ones who caused the crisis while on the path of development. Moreover, they have a higher capacity level to resolve the crisis and therefore they have made the commitment of binding emission reduction targets and of assisting the developing countries with finance and technology. The developing countries are also obliged to collect data and undertake mitigation and adaptation measures, but it was agreed they are not required to undertake binding reduction commitments.

Some major countries withdrew from the protocol before the end of the first protocol but by 2012, the emissions of the industrialized countries had decreased by 20% from 1990 levels. This reduction was five times the targets of the remaining nations. However, over the same period, global emissions rose by around 38%. After the end of the first phase, the major weakness turned out to be no participation by the developing countries. Thus, a new agreement was signed, The Paris Climate Agreement of 2015.

The Paris Climate Agreement of 2015 is one of the most major climate change treaties with the participation of almost 197 nations. The Agreement’s objectives, as set out in Article 2, include strengthening the global response to climate change by sustainable development, inter alia:

  1. limiting global average temperature increases to well below 2ºC above pre-industrial levels and striving to achieve a cap of 1.5ºC which would significantly reduce the impacts of climate change;
  2. increasing the ability to adapt to climate change in a manner that does not threaten food production; and
  3. Ensuring that consistent investment is made towards low greenhouse gas emissions and climate-resilient development.

It is important to study the UNFCCC for understanding the relationship between environment and trade. UNFCCC acts as a safeguard against trade protectionism. Article 3.5 of the convention clearly states that arbitrary or unjustifiable discrimination or a restriction on international trade should not be disguised as a measure to combat climate change. This article acts as a safeguard for developing countries who were worried that such trade measures could be used against their exports on climate grounds.

The trade and investment policy implications of the Paris Agreement are indirect because no direct implications are mentioned. One indirect implication could arise from the nature of the transaction that is introduced to successfully implement various NDCs: New opportunities for trade liberalization to fuel the global green economy. Another is inherent in what the agreement does not say: what sorts of unilateral actions are Parties free to take, given the lack of specific direction the Agreement provides to the Parties in terms of achieving their Nationally Determined Contributions (NDCs)? 

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Relationship between WTO and Environment

The World Trade Organization is deeply connected with climate change. This section will focus on the connection between the two, the various issues that have come forward in the Committee on Trade and Environment, WTO. There are several rules in the WTO that have an implication on the relationship between trade and climate change, as well as measures relating to climate change that may be constrained by the rules of the WTO. The rules include those relating to tariffs, the non-discrimination principle, standards, subsidies, and intellectual property.

Goal and Rules of WTO to facilitate International Environmental Goals. 

1. Sustainable development and environmental protection are the goals of the WTO

Sustainable development and protection and preservation of the environment are two objectives that are fundamental to WTO. These goals go hand in hand with WTO’s objective to reduce trade barriers and eliminate discriminatory treatment in international trade relations. WTO creates an obligation on member states to ensure proper trade incentives in order to promote eco-friendly technologies.

2. Trade liberalization 

In order to achieve its goal of sustainable development and protection of the environment, WTO strives to liberalize the trade of environmental goods by providing a stable environment which enhances the possibility of innovation. It was in the 1992 Rio Summit, 2002 Johannesburg Summit, and the 2005 UN World Summit that the contribution of trade towards sustainable development and the environment was recognized.

3. WTO rules aimed towards protecting the environment

WTO’s goal of sustainable development along with environmental protection can also be seen in its rules. The fundamental principles of non-discrimination, transparency, and predictability provide the member states a framework to address environmental concerns. Some of the agreements which specifically highlight such principles are:

  • Agreement on Technical Barriers to Trade (ensures discriminatory technical regulations are not implemented).
  • The Agreement on Sanitary and Phytosanitary Measures (sets basic rules for food safety; animal and plant health).
  • GATT.

4. WTO has covered environmental measures in several cases.

The WTO Dispute Settlement Body has dealt with several disputes concerning environment-related trade measures. It has been affirmed of WTO jurisprudence that WTO rules do not take precedence over environmental concerns. Some of the cases worth mentioning are:

  • US — Shrimp (conservation of sea turtles).
  • Asbestos case (A member could ban the importation of Asbestos to protect its citizens and construction workers).

5. Support of WTO Institutions

The WTO also supports its environmental goals through specialized committees. Some of the major committees which facilitate sustainable development and environment are:

  • Committee on Trade and Environment (CTE) (a forum for dialogue on trade and the environment).
  • Technical Barriers to Trade Agreement (which deals with regulations, standards, testing and certification procedures).

WTO and PPM Issue

One of the major on-going debates in WTO is the issue of PPM. The PPM concept was first introduced by some Parties and non-governmental organizations (NGOs). The idea behind the concept was to introduce trade-related environmental measures with the possible use of “Process and Production Methods (PPMs). Through this, the products can be differentiated by the way the products were made and the environment effect arising from production.

The debate arose when the WTO’s policy of “like products” was brought into the picture with this concept. WTO’s non-discrimination policy under various articles of GATT (General Agreement on Tariffs and Trade) states that:

Article 1: The members shall not discriminate between “like products” from different nations in respect of levying duties and charges.

Article 3: the foreign products should be given national treatment equal to the nation’s own products.

Article 3(2): The imported products should not be subjected to charges of any kind in excess of those applied, directly or indirectly, to like domestic products.

The main issue that arose in connection with “like products” and PPM was whether the way in which a product is produced (production methods and non-product related processes) can be used as the basis of different treatments? Thus, environment-related trade measures become a parameter?

The various views on this debate are:

  • Developing countries: If two products should be treated in a similar way if their physical characteristics are similar. Products cannot be considered “unlike” based on the difference in production methods. Therefore, it would be a violation of the GATT articles to impose trade measures on a foreign product based on the ground that the production method is not environmentally friendly.
  • Secretary of WTO: A case by case approach should be followed when it comes to differentiating between “like products” and unfair trade practices in the name of the environment. He also stated that the US- Shrimp provides an interesting example of justifiable discrimination between products based on PPMs if such a question is not dealt with within the context of the articles of GATT. US-Shrimp was a dispute concerning the way fishermen harvested shrimp. The production method used for harvesting, like the use of fishing nets and shrimp trawl vessels was resulting in several incidental killings of sea turtles, as many times, turtles can be trapped and drowned by the nets used to harvest shrimp. With the aim of reducing the killing of turtles, the US imposed a ban on the import of shrimps harvested by such production methods which may lead to the killing of sea turtles. Exporters were required to demonstrate the use of TEDs (which limit the incidental catch of endangered sea turtles), or similar equipment when harvesting shrimp in order to avoid the ban. It was held by the Appellate Body that the measures taken by the US were connected to the policy of conservation of sea turtles and was not an arbitrary restrain on International Trade. Hence, the action was justified under Article XX(g)[ii]

The PPM debate was taken up within the WTO in the Committee on Trade and Environment (CTE) in the run-up to the WTO’s first Ministerial Conference in Singapore in December 1996.

The issue was highly criticized by the developing countries that are the Third World Network (TWN). The World Trade Organization, Trade and Environment Position paper of the Third World Network pointed out that the proposal of trade-related environmental measures (TREMs) would add another burden of adjustment to the already-burdened South. Trade restrictions based on PPM could result in the change of the non-discrimination principles of International Trade and could even result in unfair trade practices under the disguise of protecting the environment.

Therefore, the attempts by some groups and countries to legitimize the PPMs i.e the trade-related environmental measures failed and lay dormant for many years. However, the trade measures being increasingly linked with environmental issues, the PPM issue has come back to life in recent years.

IPR and Climate Change

Intellectual Property Rights is another issue when PPM has been quite widespread in the world organization. IPR is extremely vital for the event and transfer of environmentally friendly technology and product. Discussions within the Trade and surroundings Committee on these 2 problems have broken new ground since there was little understanding of however the foundations of the mercantilism system may have an effect on or be plagued by environmental policies in these areas.

TRIPS Agreement (Trade-related Aspects of belongings Rights) and climate change:

  1. Article 7: The protection of IPR must facilitate the promotion of transfer and dissemination of technological innovation which mutually benefits the producers and the users of such technological knowledge. This should be in step with social and economic welfare and must maintain a balance of rights and obligations.
  2. Article 8.2: appropriate measures in line with this agreement must be taken to prevent the abuse of intellectual property rights by the owners or to prevent unreasonable restraint on trade.
  3. Article 66.2:  creates a responsibility on developed country members to provide incentives in their territory to institutions and enterprises in order to promote technology transfer to least-developed country members to help them create a sound viable technological base.

India represented a paper that laid down the framework for discussing the Trips agreement in order to promote eco-friendly technologies. The paper was present at the WTO’s Committee on Trade and Environment in March 1996.

For environmentally beneficial technologies, to encourage their global use, India proposed three points:

  • Members may have to excuse technologies which are essential to safeguard or improve the environment from patentability in order to allow free production and use. A suitable amendment will have to be made to incorporate this exclusion because such exclusion is not compatible with TRIPS.
  • The present technologies which already have patent rights can be revoked by the members if this is often tired consonance with the Paris Convention and is subject to judicial review.
  • To encourage the use of eco-friendly technology, the members need to be allowed to reduce the patent protection from 20 years i.e the current minimum to about 10 years in order to provide easy and free access to eco-friendly technologies.

Despite the TRIPs agreement, not many steps have been taken by developed countries to aid developing countries in order to encourage trade of technology which is eco-friendly.

Conclusion

This paper has dealt with two major issues related to trade and environment; PPM and IPR. The developed and developing countries hold the opposite view on both issues. The debates come down to the two questions by both types of Countries:

  • The developing countries argue that they shouldn’t have to pay the price for the developed country’s mistakes. During their development stage, the developed countries harmed the environment the most and it’s their fault that the World is in this problem. So why should the Developing countries pay the price by halting their own development?
  • The developed countries argue that they shouldn’t be alone bearing the brunt of climate change. Developing countries should equally be held responsible.

Given the rising temperatures and climate change, it is very important for the nations to work towards the goal of sustainable development for all. The developed and developing countries need to come to a compromise so that the threat to the environment and human development can be neutralized.

References

  1. https://www.ipcc.ch/assessment-report/ar5/
  2. Article 3.9, Kyoto Protocol
  3. https://www.dw.com/en/kyoto-protocol-climate-treaty/a-52375473
  4. https://www.nrdc.org/stories/paris-climate-agreement-everything-you-need-know#sec-whatis
  5. Cosbey, A (2016), ‘The Trade Implications of the Paris COP21 Agreement’, International Trade Working Paper 2016/17, Commonwealth Secretariat, London.
  6. https://www.southcentre.int/wp-content/uploads/2013/05/RP29_Climate-and-Trade-Relation_EN.pdf
  7. https://www.wto.org/english/tratop_e/envir_e/envt_intro_e.htm
  8. WTO case Nos. 58 (and 61). Ruling adopted on 6 November 1998
  9. https://www.wto.org/english/tratop_e/envir_e/edis09_e.htm
  10. https://www.wto.org/english/docs_e/legal_e/gatt47_01_e.htm#articleIII
  11. https://www.wto.org/english/tratop_e/envir_e/envt_rules_gatt_e.htm
  12.  https://www.twn.my/title/env2-ch.htm
  13. Non-paper by India, 23 July 1996

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