Olivier de Schutter, trade deals and environment

O. De Schutter - Linking Trade to Climate Change

Agreement establishing the World Trade Organization (WTO), Preamble: Members' "relations in the field of trade and economic endeavour should be conducted with a view to raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, and expanding the production of and trade in goods and services, while allowing for the optimal use of the world's resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment and to enhance the means for doing so in a manner consistent with their respective needs and concerns at different levels of economic development".

European Parliament Post-Growth Conference - 19 September 2018

O. De Schutter - Linking Trade to Climate Change

THE EMPIRICAL ISSUES ENVIRONMENTAL STANDARDS Positive impacts Consumer pressure of trade Technology transfers (technologies embedded in intermediate goods and capital goods, accelerated uptake of green technologies) Negative impacts of trade

Scale effects (consumption growth linked to efficiency gains from trade and availability of low-priced goods) Carbon leakage (interjurisdictional competition)

European Parliament Post-Growth Conference - 19 September 2018

O. De Schutter - Linking Trade to Climate Change

CARBON LEAKAGE

Largest interregional fluxes of emissions embodied in trade (Mt CO2 y−1) from dominant net exporting countries (blue) to the dominant net importing countries (red). Source: Davis S J , Caldeira K PNAS 2010;107:5687-5692 European Parliament Post-Growth Conference - 19 September 2018

O. De Schutter - Linking Trade to Climate Change

CARBON LEAKAGE

Mean CO2 intensity of imports and exports to and from the largest net importing/exporting countries (and Middle East region). Source: Davis S J , Caldeira K PNAS 2010;107:5687-5692 European Parliament Post-Growth Conference - 19 September 2018

O. De Schutter - Linking Trade to Climate Change

LEGAL ISSUES – WTO COMPATIBILITY OF LINKAGE GENERAL CHARACTERISTICS OF LABOR AND ENVIRONMENTAL CONDITIONALITIES 1.The production and process methods (PPMs) are targeted, rather than the products’ physical characteristics themselves – raises the question of whether products that are identical except for how they were produced are ‘like’ products for purposes of the MFN clause or the National Treatment Clause 2.The linkage is ‘outward-looking’: the objective is to influence labor or environmental standards under the jurisdiction of the trading partner (i.e., in the exporting country), however (i) purely domestic measures may have a similar impact on the trading partner; (ii) the preferences of consumers, increasingly concerned with the sustainability of their purchasing practices, may be relevant, and (iii) the notion of extraterritorial human rights obligations is increasingly acknowledged (though international human rights law is still short of recognizing a clear duty to take affirmative steps to influence human rights abroad) European Parliament Post-Growth Conference - 19 September 2018

O. De Schutter - Linking Trade to Climate Change

IS LINKAGE COMPATIBLE WITH WTO REQUIREMENTS?

European Parliament Post-Growth Conference - 19 September 2018

O. De Schutter - Linking Trade to Climate Change

1. General sanctions.

1.1. If a WTO Member were to impose certain restrictions on goods or services not complying with certain environmental standards, it would have to demonstrate that these measures constitute neither a form of discrimination prohibited under the most-favored nation and national treatment clauses, nor a quantitative restriction prohibited under Article XI of the General Agreement (and its equivalent provision, Article XVI, in GATS).

WTO Dispute-Settlement Bodies to treat regulatory requirements that concern PPMs, when extended to foreign goods, as a quantitative measure, comparable to a quota or an import ban.

The WTO Member will have to justify the particular restriction imposed by relying on the General Exceptions Clauses of Article XX GATT or Article XIV GATS. The GATT General Exceptions Clause allows the adoption of trade-restrictive measures that would otherwise be prohibited, under a set of strictly defined conditions. The General Exception Clauses allow for measures which are a means to ensure the "conservation of exhaustible natural resources" (Article XX (g), GATT).

European Parliament Post-Growth Conference - 19 September 2018

O. De Schutter - Linking Trade to Climate Change

Article XX GATT – General Exceptions Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade, nothing in this Agreement shall be construed to prevent the adoption or enforcement by any contracting party of measures: (a) necessary to protect public morals; (b)necessary to protect human, animal or plant life or health; ... (e)relating to the products of prison labour; … (g) relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption; …

European Parliament Post-Growth Conference - 19 September 2018

O. De Schutter - Linking Trade to Climate Change

1.2. Measures adopted unilaterally by a WTO Member would be easier to justify if they are strictly based on the existing international consensus in favor of combating climate change, and if accompanied by appropriate burden-sharing towards developing countries. It will be important, both for legal and for political reasons, to avoid the perception that such measures are protectionist in nature, and a means to deprive developing countries from what they may see as their comparative advantage. Confidence-building measures may consist in : (i)reference to universally recognized standards; (ii)assessment of compliance with these standards by independent monitoring bodies; (iii)a phased application of the measures, leaving time for consultations and for improvements to be made in the exporting country concerned, before any disadvantages are imposed; (iv)a use of any funds collected as a result of an increase in import tariffs aiming to encourage compliance with environmental or labor standards, for the benefit of programs supporting reforms in developing countries, including through the transfor of technologies and capacity-building.

European Parliament Post-Growth Conference - 19 September 2018

O. De Schutter - Linking Trade to Climate Change

2. Border tax adjustments for “carbon equalization”.

2.1. Article II:2(a) GATT allows WTO Members to apply a charge on imports equivalent to an internal tax provided that the charge is not "in excess of those applied ... to like domestic products". Thus, border tax adjustments are authorized in principle, provided they are taxes on products rather than direct taxes on producers compensating, for instance, for different costs of labour in the respective countries.

2.2. The level of BTA may be based on (i) the ‘predominant method of production’ criterion (tax would be set assuming that the imported good is produced in accordance to such methods of production that are predominant in the importing country); on (ii) the ‘best available technology’ criterion (foreign products are taxed at a level that assumes that they rely on the cleanest technologies available); or (iii) on the ‘applied technology’ criterion (assessing, on a case-by-case basis, the impacts of the production processes embedded in the product).

European Parliament Post-Growth Conference - 19 September 2018

O. De Schutter - Linking Trade to Climate Change

Different methods for « carbon equalization » border measures Predominant method of Best available production technology

Applied technology

Easy to implement Disadvantageous to domestic producers in the importing country

Easy to implement Legally most immune from challenge because advantageous to the foreign product

Difficult to implement, requring case-by-case determination

Incentive for domestic producers to improve, thus « raising the bar »

No incentive for the foreign producer to improve

Incentive for the foreign producer to improve

European Parliament Post-Growth Conference - 19 September 2018

O. De Schutter - Linking Trade to Climate Change

3. The GSP scheme The EU's GSP scheme, including a ‘GSP-plus’ component for sustainable development (human rights, labour rights, environmental standards) is compatible with WTO law provided any preference is granted on a non-discriminatory basis, so that all similarly-situated GSP beneficiaries, who have the same ‘development, financial and trade needs’, should have access to the scheme under the same conditions.

4. Labelling schemes 4.1. Labelling schemes are authorized under Article 2.1 TBT (Technical Barriers to Trade) Agreement provided the mandatory schemes (‘technical regulations’) are applied in ways that do not result in discrimination against foreign products and do not create unnecessary obstacles to trade.

Similar requirements (though less strictly worded) apply to schemes that are voluntary (‘standards’). …

European Parliament Post-Growth Conference - 19 September 2018

O. De Schutter - Linking Trade to Climate Change

4. Labelling schemes ‌ 4.2. Where an international standard prepared by an “international standardizing bodyâ€? is available or where its completion is imminent, a WTO Member should take guidance from that standard. The future development of ecolabels and social labels should go hand in hand with increased efforts to develop a multilateral approach to this question, with the active participation of WTO Members from developing countries, and organisations of producers from the South. This would strengthen the position of countries wishing to introduce such labels, and gradually lead to identify the best way to reconcile trade with concerns about workers' rights and the environment.

European Parliament Post-Growth Conference - 19 September 2018

O. De Schutter - Linking Trade to Climate Change

Should a label indicating the carbon footprint of a product be mandatory in the future (EU-27 total)?

Source: Eurobarometer, Europeans' attitudes towards the issue of sustainable consumption and production. Analytical report. Flash Eurobarometer 256 - The Gallup Organisation for the European Commission, DG Environment, 2009 (fieldwork: April 2009), p. 24 European Parliament Post-Growth Conference - 19 September 2018

O. De Schutter - Linking Trade to Climate Change

Should a label indicating the carbon footprint of a product be mandatory in the future (EU-27 total, on a country-by-country basis)?

Source: Eurobarometer, Europeans' attitudes towards the issue of sustainable consumption and production. Analytical report. Flash Eurobarometer 256 - The Gallup Organisation for the European Commission, DG Environment, 2009 (fieldwork: April 2009), p. 24 European Parliament Post-Growth Conference - 19 September 2018