[The author will extend the analysis and proposals contained in this paper in an ODC Policy Essay that will be published in Fall 1999. Professor Sampson's project is a component of both ODC's Program on Investment, Trade and Development and its Program on Global Problems]

The World Trade Organization (WTO) and its predecessor, the General Agreement on Tariffs and Trade (GATT), have been highly successful over the past half-century in reducing trade barriers and maintaining a nondiscriminatory and rules-based commercial system. The progressive reduction of trade barriers has produced a remarkable increase in international commerce. Multilaterally agreed, legally binding principles and rules now apply to trade in goods and services worth thousands of billions of dollars among 133 countries at all levels of development.

While protecting the environment is not the WTO's primary objective, the importance of this policy goal has been clearly acknowledged in WTO agreements and recent WTO dispute proceedings. In the preamble to the 1994 agreement establishing the WTO, for example, Member countries agreed to "protect and preserve the environment and to enhance the means for doing so. WTO rules permit governments to implement within their borders whatever legitimate policies they wish with respect to the environment. In its late-1998 ruling in a dispute concerning U.S. trade measures against countries that do not employ devices to protect sea turtles from shrimp nets, the report of the WTO's Appellate Body asserted "we have not decided that the sovereign nations that are Members of the WTO cannot adopt effective measures to protect endangered species, such as sea turtles. Clearly, they can and should." The Appellate Body held further that "WTO Members are free to adopt their own policies aimed at protecting the environment as long as, in doing so, they fulfill their obligations and respect the rights of other Members under the WTO Agreement." This report reflects a recognition in the WTO of the importance of promoting sustainable development and preserving the environment.

While not questioning the success of the GATT and the WTO in expanding trade, many environmentalists have, however, been critical of the multilateral trading system. They object to WTO rules that constrain both the use of trade measures to extend domestic environmental standards beyond national borders and discrimination against imports that are believed to undermine domestic standards. The animosity of some environmental organizations toward the WTO has intensified in the aftermath of recent dispute-settlement decisions that appeared to some to place the objective of free trade ahead of preservation of the environment.

Continued conflict between the environmental and trade communities will be harmful to the goals of both. Multilateral trade liberalization requires broad public support. To the consternation of trade officials, however, environmental nongovernmental organizations (NGOs), together with other institutions of civil society, have proven themselves capable of mobilizing sufficient public sentiment to block multilateral economic negotiations. Yet conflict over trade-related environmental matters also diverts precious governmental and private resources away from promising multilateral efforts to protect the environment.

Seeking a way out of the present impasse, WTO Members have agreed to convene a High Level Symposium on Trade and the Environment, bringing together representatives of governments and civil society, March 15-16, 1999. This meeting, the result of efforts from many quarters, offers the trade and environmental communities the first in a series of opportunities over the next year to jointly seek to clarify the role of the WTO in environmental matters and to reconcile trade and environmental policy goals. The Symposium will close with a summing-up by the WTO Director-General. The Director-General's report, which will constitute the meeting's principal outcome, is likely to influence the preparations for the WTO Ministerial at the end of 1999. The Ministerial, the third such high-level gathering since the creation of the WTO, is expected to launch and set the agenda for a new round of global trade talks beginning in 2000.

These critical meetings and negotiations hold promise for trade and environment issues for several reasons. Perhaps most importantly, there is a broad awareness that it is time to address the interface of trade and environmental policy at a higher political level in the WTO than has been the case to date. Furthermore, much of the groundwork has been laid in the WTO for dealing with key trade and environmental concerns. Many proposals have already been advanced. A number of these concerns and proposals (e.g., greater transparency, improved dialogue with civil society) are already under discussion in one or more bodies of the WTO.

Even though decisions will not be taken during the High Level Symposium, as the first step in a longer-term deliberative process, the meeting has the potential to shape the trade and environment debate. But it is important to have realistic expectations about what the Symposium, as well as the Ministerial and a new trade round, can accomplish, while still maintaining a measured degree of ambition. The WTO is made up of 133 governments, each acting on behalf of diverse constituents, and key decisions are made by consensus. Change in the WTO takes time.

In the following section I propose a new way of thinking about initiatives designed to reconcile trade and environmental goals—a framework for action. I then focus on five issues that have been at the center of the trade and environment debate. In each case, I identify key questions that need to be addressed during the Symposium or in subsequent WTO meetings; in several cases, I offer specific reform proposals.

An important implication of the framework and reform proposals is that the work of the WTO can promote a healthy environment and sustainable development. Not only is conflict between environmental protection and the WTO not inevitable, but the two can play mutually supportive roles.

A Framework For Action

Initiatives that seek to address trade and environment conflicts may be usefully organized into groups defined by the required degree of government involvement or negotiation. On this basis, it is possible to envisage three categories of initiatives:

• First, for certain objectives there may be sufficient informal support from WTO Members for the Director-General and the Secretariat to undertake measures without formal discussion and decision-taking by Members. In such cases, consultation among Members would be a necessary and sufficient requirement for action.
• Other initiatives would require the collective approval of Members, but not necessarily changes in formal rules, rights, or obligations. Governments have become Members of the WTO, ratified all its various agreements, and subjected themselves to the disciplines of those agreements because they believe the obligations they have assumed are justified by the rights they have acquired. Changing this balance requires negotiation, often in areas quite distinct from those under discussion. In cases like these, consultation would be a necessary but insufficient requirement.
• Finally, there are objectives that can only be achieved through a formal change in rules, which, historically, has only been possible during comprehensive trade rounds.

The classification of issues under this framework cannot be categorical; some objectives could usefully be pursued in more than one of the three ways set out above. Improving the relationship between the WTO and multilateral environmental agreements (MEAs), for example, could be addressed through closer cooperation between secretariats or through an understanding agreed by all governments. The ultimate objective would be the same in each case, but the time horizon for results would be different.

By helping establish a shared understanding of the kinds of steps necessary to achieve certain reforms—and the level of effort those steps require—this framework can facilitate cooperation and build confidence between the trade and environmental communities. The framework can also usefully adjust expectations. For trade policymakers, it may highlight reforms that can be implemented without protracted multilateral negotiations. For environmentalists, the framework may draw attention to the fact that some desired reforms cannot be achieved without extensive negotiations or changes in rules.

Critical Trade and Environment Issues

I will now address five key trade and environment issues with which WTO Members will be grappling during the High Level Symposium and perhaps during the Ministerial and a new trade round: 1) pressure from environmental NGOs for greater WTO transparency and public access; 2) the impact of trade liberalization on the environment; 3) the distinction between product- and process-related environmental standards; 4) the relationship between the WTO and the MEAs; and 5) environment-related trade disputes.

Transparency and Public Access.

A widespread perception that the WTO is inaccessible and unresponsive to civil society has generated hostility not only toward the organization, but toward the multilateral trading system more broadly. Improving understanding of the WTO is important to securing the necessary support for future trade negotiations from environmentalists and other civil society representatives.

The WTO is an intergovernmental organization in which national governments act on behalf of their constituents. Member governments have a responsibility to establish effective consultative processes at the domestic level through which organizations of civil society can make a contribution to multilateral trade policy. Nevertheless, it is important that at the multilateral level there exists sufficient transparency and dialogue to support and extend consultation at the national level. WTO Members appear to accept that greater openness to civil society does not threaten the intergovernmental nature of the organization. The May 1998 Ministerial Declaration notes, for example, that WTO Members recognize "the importance of enhancing public understanding of the benefits of the multilateral trading system in order to build support for it and agree to work towards this end. In this context we will consider how to improve the transparency of WTO operations." Two dimensions of the WTO's relationship with environmental NGOs and other institutions of civil society have received considerable attention recently: access to documents, and dialogue. In both areas, it should be possible to reach consensus quickly on a set of reforms that are realistic and ambitious.

Access to WTO Documents. Since the establishment of the WTO, several steps have been taken to broaden the circulation of documents. Guidelines adopted by the WTO's policymaking General Council in July 1996 are based on the principle that all documents should be circulated without restriction. Under current rules, however, WTO Members review document lists and select candidates for public circulation.

Subject to limited exceptions, all submissions by WTO Members, Secretariat background notes, minutes of meetings and agendas, and other documents should be circulated immediately as unrestricted documents. Appropriate exceptions would include documents that could compromise the negotiating position of a Member country, contain trade secrets or other proprietary information, or contain sensitive information relating to a country's economic circumstances. In practice, very few documents will meet these criteria.

Current rules also require that certain documents—such as minutes of meetings—be withheld for six months, even when they are to be circulated as unrestricted. It is not clear what purpose this serves. Documents cleared for public access under these more liberal standards could be quickly and inexpensively circulated through the WTO's Internet website, substantially improving transparency.

Dialogue with Civil Society. More frequent and systematic opportunities for dialogue with civil society at the multilateral level would complement dialogue undertaken at the national level. The guidelines adopted by the General Council in July 1996 authorized the Secretariat to develop the modalities for WTO interaction with civil society.

In a July 1998 proposal to the General Council, the Director-General proposed scheduling regular briefings for NGOs on WTO activities and compiling a monthly list of NGO documents that would be made available to all Members. An NGO "Forum" has also been created on the WTO website. In recent years, the Secretariat has organized symposia on important WTO matters for representatives of NGOs and Member countries.

During future symposia, for example, the WTO Secretariat could organize working groups that would address specific trade and environment issues like those described below, drawing jointly upon the expertise of government and civil society representatives. The output of these working groups could be made available to the relevant WTO bodies and reported publicly.

In an effort to improve understanding of trade and environment issues, the WTO Secretariat has conducted six regional seminars involving officials from the relevant ministries of developing countries. In recent seminars, three days of official meetings were followed by two additional days of meetings in which government officials were joined by representatives of regional environmental NGOs.

It is important that these initiatives not be considered one-time affairs; follow-up is important, but at present not provided for. Funding from the regular budget of the WTO should be allocated both for the NGO symposia and for the regional seminars. This would alleviate the need for the Secretariat to engage in a time-consuming search for voluntary contributions from individual WTO Members.

Finally, in the run-up to the 1999 Ministerial, the General Council could provide a forum for an exchange of views among WTO Members on the broader issue of developing effective relationships with interested stakeholders. The General Council should consider, for example, recent NGO proposals for a "Standing Conference" that would address trade and environment issues.

Trade Liberalization and the Environment

There is a belief in some quarters of the environmental community that trade liberalization, by promoting increased commerce, tends to degrade the environment. In a number of industries and sectors, however, precisely the opposite is true. A reduction in trade barriers generally increases the efficiency of production, which means the same amount of output can be produced with fewer resources. But eliminating trade restrictions and distortions can also directly produce "win-win" outcomes in specific industries: environmental benefits and improved market access.

Identifying and exploiting these potential "win-win" situations is an initiative that clearly can be pursued within the existing rules of the WTO. While there has been considerable progress in this regard, more work needs to be done to identify promising sectors and products. Several sectors can be suggested as candidates:

• In the case of fisheries, subsidies are widespread, distort trade, and undermine the sustainable use of fish resources. Both New Zealand and the United States have made submissions to the WTO's Committee on Trade and Environment (CTE) on the potential environmental benefits of removing distortions in the fisheries sector.
• The agricultural sector is characterized by direct and often significant negative environmental effects resulting from market access restrictions, domestic support measures, and export subsidies. Excessive subsidization leads to intensified land use, increased application of agro-chemicals, the adoption of intensive animal production practices, over-grazing, the degradation of natural resources, loss of natural wildlife habitats and biodiversity, reduced agricultural diversity, and the expansion of agricultural production into marginal and ecologically sensitive areas.
• A number of practices in the forest product sector simultaneously distort trade and adversely affect the environment. For example, tariff escalation in importing countries prompts exporting countries to subsidize value-added activity. This leads to excessive exploitation of forests and consumes budgetary resources that could otherwise be directed to reforestation.
• By distorting prices, energy subsidies exacerbate environmental problems linked to energy production and use. These measures are the focus of much of the climate change discussion.
• Finally, there is no reason why the highest quality environmental goods and services should not be more widely available on world markets at competitive prices.

It is important to note, however, that not all trade restrictions or distortions are environmentally unfriendly. The value of subsidies designed to promote the adoption of environmentally sound technologies, for example, is well recognized in WTO agreements.

To achieve concrete results in this area, trade negotiators will require a greater degree of specificity. The important practical question is who will identify products and sectors that are promising targets for liberalization. One answer is governments. In the CTE, developed and developing countries could, based upon national experience, identify products for which the removal of trade distortions would benefit both trade and the environment (e.g., Brazil's identification of restrictions on trade in ethanol as a priority for liberalization). Civil society can also play a particularly useful role. This has been apparent in the work of environmental NGOs on fishery subsidies. Once priority products or sectors for liberalization are identified, it is the responsibility of governments either to make proposals to the appropriate WTO bodies or to put the relevant sectors on the agenda of future trade negotiations.

Product- and Process-Related Environmental Standards

WTO rules permit Member governments to regulate imports on the basis of their essential characteristics, but the rules prohibit discrimination against imports on the basis of how they were produced. The rule that imported and domestic "like products" should be treated equally under national trade policy, regardless of how they were produced, is considered by many to be fundamental to the effective functioning of the trade system. Yet discriminating among products on the basis of how they were produced is at the heart of much domestic environmental regulation. So-called "life-cycle analysis" is a key concept for environmentalists.

WTO Members need to take a careful look at how the trade system handles product- and process-related environmental standards. For example, some consider "eco-labelling," the practice of identifying foreign products according to the manner in which they were produced, to be discriminatory under WTO rules. More generally, there is no agreement on the extent to which the Technical Barriers to Trade (TBT) Agreement applies to life-cycle-based eco-labels or other process-related standards (rather than to the characteristics of the products themselves). Yet the TBT Agreement is bound to be invoked more frequently as the number of process- based—as opposed to product-based—regulations and standards increases.

The ruling in the shrimp-turtle dispute also raises difficult questions concerning the application of trade rules to product- and process-related standards. The Appellate Body appeared to suggest that it was not the extraterritorial application of U.S. environmental standards that violated WTO rules in this case, but the arbitrary manner in which the U.S. law was applied. Some WTO Members and trade specialists claim this reasoning validates an aggressive unilateralism in the service of domestic laws targeting foreign production processes. Some environmentalists, of course, believe it is entirely appropriate that WTO rules extend beyond product characteristics and into production processes.

There is no sign at present of consensus on these issues. But they pose fundamental questions for the WTO and its Member countries, and they need to be addressed in the near term, perhaps in the next global trade round. The High Level Symposium would be a good place to start the discussion.

Multilateral Environmental Agreements and the WTO

It is clear to the trade officials who represent Member countries in the WTO that they have no special expertise on environmental problems. They recognize that policy relating to transboundary environmental problems is best dealt with on the basis of consensus in specialized multilateral agreements or institutions. During recent discussions within the CTE, however, a number of governments have expressed concern about potential conflicts between MEA and WTO rules and obligations. Since there have been no disputes thus far relating to such conflicts, there has understandably been little enthusiasm for changes in WTO rules that could have potentially far-reaching and unforeseeable consequences both for the WTO and the MEAs. Yet several countries have argued compellingly that it would be prudent for the WTO to address the possibility that measures inconsistent with WTO rules could be applied under certain MEAs.

One proposal circulating in the WTO calls for amending one or more WTO Agreements or drafting an "Understanding on Interpretation" comparable to those prepared for certain GATT Articles in the Uruguay Round. For example, an amendment to the exception provisions of GATT Article XX could accommodate measures taken pursuant to an MEA that might otherwise be inconsistent with WTO rules. Another way to handle potential conflicts between the WTO and MEAs is for Members to seek, in exceptional circumstances, a waiver from a WTO obligation, subject to the approval of WTO Members. In such a case, it would have to be clear that the waiver applied only to measures taken for environmental purposes in accordance with an MEA.

If proposals such as these were to be pursued, there would need to be agreement on which MEAs were relevant. Drawing up a list, or defining the characteristics of a relevant MEA, would require close cooperation between trade and environmental officials.

The essence of these proposals is that WTO Members must be permitted to forgo their WTO rights and allow their trade to be discriminated against if they fail to meet standards specified in an MEA to which they are a party. Some observers may consider the formal WTO recognition of standards established under MEAs a departure from WTO tradition, but some WTO agreements, such as the Agreement on Sanitary and Phytosanitary Measures, already defer to other international agreements with enforceable standards that apply to WTO Members.

A difficult question arises when not all WTO Members are parties to an MEA that includes trade measures: How do we handle situations in which a WTO Member's trade is discriminated against pursuant to the rules of an MEA to which the WTO Member is not a party?

Dispute Settlement

The WTO's new dispute-settlement mechanism is one of the most significant outcomes of the Uruguay Round. In many respects, the system has been a great success. In just four years, more than 150 disputes have been brought to the WTO. But while this large caseload reflects the confidence of WTO Members in the dispute system, it has raised concerns about the sustainability of high-quality adjudication, given the limited resources of the WTO. In addition, representatives of civil society have expressed concern about the transparency and accessibility of the dispute mechanism.

The current formal review of the WTO's Dispute-Settlement Understanding (DSU) provides an opportunity to address the question of transparency. There is no reason, for example, why there should not be a more rapid dissemination of panel and Appellate Body reports once the "Findings and Conclusions" section has been made available in all three WTO working languages, even if the descriptive part of the report still only exists in one language.

The DSU provides an opportunity for the parties to a dispute to engage in a round of consultations with the Director-General before a panel is requested. It has been suggested during the DSU review that more frequent recourse to the consultative process could reduce the panel caseload by resolving disputes before lines are drawn and stakes are raised. But a modified approach to the consultative process could have other advantages.

WTO Members could explore the establishment of a consultative approach in which, subject to the approval of the parties, certain disputes, such as those dealing with the environment, would be debated in a fully transparent manner, including the possibility of public hearings and a moderator nominated by the Director-General. This consultative procedure would differ from current practice in a critical respect: it would be totally open and transparent, permitting whatever level of public debate was thought useful. Relevant facts could be put on the table by all interested parties, governmental and nongovernmental.

This alternative consultative mechanism would stand outside the current system. Recourse to these consultations would not diminish a party's rights or obligations under the DSU. In accordance with the DSU, a request for the good offices of the Director-General would remain an option. Yet this new consultative process could be organized within the context of the WTO. The WTO already sponsors a variety of symposia in which interested governments and NGOs discuss trade and environment issues. Why not make it possible to openly discuss specific issues or disputes in which the public has an interest? If these alternative consultations did not work, Member countries could pursue their rights within the formal—and, at least for the moment, more closed—DSU process. Finally, there is no reason why such a process could not be established outside of the WTO if the proposal were not adopted by the WTO itself.

Conclusion

In this paper I have advanced a framework for thinking about initiatives aimed at reconciling trade and environmental goals. I have also discussed several critical issues to which the framework is relevant. There are clearly many other such issues. An equal or higher priority might be assigned by some, for example, to intellectual property rights and biodiversity, to trade liberalization and environmental assessment, to services trade and the environment, or to issues relating to the precautionary principle and sanitary and phytosanitary measures. Some WTO- watchers have also raised the concern that the Appellate Body, in its shrimp-turtle ruling, has extended its authority beyond matters of fact and law and into policymaking, which WTO Members consider their exclusive domain.

From a broader perspective, the ultimate objective of this paper is to offer a framework within which policy communities that have often been at odds can collaborate in the effective and coherent use of instruments of global governance. This broader objective lies behind the search for mutually supportive roles for trade and environment policies in the international arena.

---

Gary Sampson is Visiting Academic in the Department of International Relations of the London School of Economics. He is also Professorial Fellow at the Centre for International Trade, Melbourne Business School, University of Melbourne. Professor Sampson also teaches on a regular basis at the European Institute of Business Administration (INSEAD) in Fontainebleau, France. For 12 years he served as director of a number of GATT/WTO divisions, most recently as Director of the WTO's Trade and Environment Division.

Comments to: weiner@odc.org

The views expressed are those of the author and do not necessarily represent those of ODC as an organization or its individual officers, Board, Council, or staff members.