Trade and Environment Newsletter — Issue 9, May 2012

India boycotts EU aviation emissions scheme – EU’s green protectionism a ‘deal breaker’ for climate talks

The Indian Civil Aviation Minister has stated that Indian airplanes will boycott the European Union’s emissions trading scheme.  The Indian Environment Minister has also said that the European Union’s unilateral trade measures are a “deal breaker” for climate change negotiations.

The Indian Government has confirmed that it has directed Indian airplanes not submit carbon emissions data to the EU, which would otherwise allow the EU to calculate the amount of carbon released and therefore how much to charge Indian airliners.  This move comes on the back of China’s ban on Chinese airlines complying with the EU ETS without government sanction.  Most recently, the French Government has also expressed its desire for the EU to ‘revisit’ the application of an ETS to aviation.

In more damming evidence of the ruinous implications of the EU’s unilateral environmental measures against foreign owned and operated entities, the Indian Environment Minister has been quoted as stating that the ETS on aviation amounted to a ‘deal breaker’ for future climate change negotiations.

There is little wonder why Indian and other developing nations would see the EU’s actions in this way.   Throughout the climate change negotiations developing nations have been clear in their rejection of environmental trade barriers.

The European Union has compounded the irritation of other nations by countering that its actions will “encourage” other nations to enact similar laws.  Unilateral action to restrict trade on environmental is increasingly a hallmark of EU policy following on from the now notorious Renewable Energy Directive.

The number of nations registering their concerns is growing.  The result, as flagged by South African tourism minister Marthinus van Schalkwyk, may be a trade war. To date, the EU has ignored these concerns.

 

Consensus emerging – environment must not be used for unjustified trade barriers

A workshop of the WTO Committee on Trade and Development on Aid for Trade and the ‘transition to a green economy’ has reiterated that environmental measures must not constitute unjustified environmental trade barriers.  Many participants in the workshop talks highlighted  that trade was central to achieving environmental goals.

In the lead up to the Rio+20 Summit, there have been growing calls from the environmental lobby to recast the definition of sustainable development to mean that environmental considerations take precedence over economic growth or poverty alleviation.  The commonly agreed definition of sustainable development from the first Rio Earth Summit in 1992 focussed on balancing poverty alleviation with environmental conservation.

The WTO Committee workshop talks flagged that projects for the distribution of aid money may possibly be able to consider both environmental and trade objectives.  This opinion is also backed by a paper prepared by the WTO for the Rio+20 Summit, which urges for the protection of free trade as a mechanism to ensure developing nations can afford to transition towards a ‘green economy’.

While developing nations are virtually in lock-step agreement over the requirement to maintain the free trading regime, a paper written by the Swedish International Relations and Security Network entitled “Green Economics and the Rise of the Rest”, shows a large disconnect between the EU and the rest of the developed nations and between developed and developing nations.

The paper highlights the schism between the EU’s vision of a ‘green economy’ and the view of the remaining developed nations.  The EU’s view is stated as being based on ‘idealism’ by seeking to set targets for compliance.  Other developed nations, including some within the EU, are stated to prefer a ‘green economy’ which does not undermine or disadvantage economic development.

The gap between developed and developing nations is even starker.  It is an almost universal view amongst developing nations that sustainable development must continue to balance economic growth and the environment, such that some nations such as India have suggested that targets for a  ‘green economy’ should only apply to developed nations.

This position has also been supported by United Nations Secretary-General Ban Ki-moon, who stated that “[s]ustainable development recognises that our economic, social, and environmental objectives are not competing goals that must be traded off against each other, but are interconnected objectives that are most effectively pursued together in a holistic manner”.

These vastly different conceptions of sustainable development and the strident position of the developing nations is a clear indication to the EU and other developed nations that attempt to give the environment preference over economic growth will not be tolerated and could hold up any outcome at all from the Rio+20 Summit.

 

Canada’s feed-in-tariff scheme under the spotlight in the WTO

The Ontario local content laws for their domestic feed-in-tariff scheme has come before the World Trade Organisation.  Complainants, Japan and the EU, argued that the local content requirements unfairly advantaged domestic producers of the components of solar and wind power generators.

Japan and the EU have both argued that the local content rules breach the WTO Agreement on Subsidies and Countervailing Measures (SCM), the Agreement on Trade-Related Investment Measures, and the national treatment requirements of the General Agreement on Tariffs and Trade (GATT).

Canada has strenuously argued that the feed-in-tariff measure amounts to government procurement of cheap renewable energy and therefore exempt from a number of the Agreements it is claimed to have breached.  The EU and Japan however have argued that because the Ontario Government never has possession or exercises control over the renewable energy given, the measure cannot amount to ‘government procurement’.

Parties will now submit their rebuttals to the cases put before the dispute settlement panel and a public finding is not expected until October this year.

 

BRICS back economic development as a key to sustainable development in Rio run-up

The recent fourth BRICS Summit in New Delhi – attended by representatives from the governments of Brazil, Russia, India, China and South Africa – has endorsed the idea that economic development is central to the implementation of sustainable development and moved the concept of a ‘green economy’, as pursued by the European Union, should not be regarded as an end in itself.

The resulting Delhi Declaration from the meeting agreed in Articles 30 and 34 that (emphasis added):

  • 31. We believe that the UN Conference on Sustainable Development (Rio+20) is a unique opportunity for the international community to renew its high-level political commitment to supporting the overarching sustainable development framework encompassing inclusive economic growth and development, social progress and environment protection in accordance with the principles and provisions of the Rio Declaration on Environment and Development, including the principle of common but differentiated responsibilities, Agenda 21 and the Johannesburg Plan of Implementation.
  • 34. We affirm that the concept of a “green economy”, still to be defined at Rio+20, must be understood in the larger framework of sustainable development and poverty eradication and is a means to achieve these fundamental and overriding priorities, not an end in itself. National authorities must be given the flexibility and policy space to make their own choices out of a broad menu of options and define their paths towards sustainable development based on the country’s stage of development, national strategies, circumstances and priorities. We resist the introduction of trade and investment barriers in any form on the grounds of developing green economy.

It is clear from this Declaration that five of the world’s largest nations will continue to support a definition of sustainable development which is based on a balance between poverty eradication and environmental conservation.  This Declaration will come as a major set-back to the EU and environmental NGOs.

 

United States seek to use TPP negotiations to implement draconian environmental rules on developing nations

The Office of the United States Trade Representative has endorsed a highly controversial and disturbing agenda to use the Trans Pacific Partnership negotiations to entrench environmental trade barriers.  This move is a furtherance of campaigns by developed nations to implement environmental conditionality on trade through bilateral or multilateral agreements.

Deputy United States Trade Representative, Demetrios Marantis, has stated that the TPP should require Parties to adopt obligations on illegal logging, illegal wildlife trade and over-fishing.  Marantis stated that the United States was seeking to “assimilat[e] environmental priorities more directly and aggressively into our trade policies”.

Comments by Assistant United States Trade Representative, Mark Linscott at a recent Brookings Institute seminar on trade and environment reconfirmed the intention of the US Administration to seek inclusion in the TPP negotiations of US ENGO position that Free Trade Agreements including environmental obligations.

In what was a clear indication of his underlying alliances and motivations, Linscott stated that “trade has been taking place in these areas for a long, long time, with devastating impacts [on the environment]”.  The blatant anti-free trade message from the USTR should be a warning to all parties to the TPP negotiations.

This position is a direct reflection of the United States Democratic Party’s Trade Reform, Accountability, Development and Employment (T.R.A.D.E.) agenda which sought set down environmental standards for imports through Free Trade Agreements.

This position is also in conflict with the position of the Leaders of APEC.  The APEC Leaders’ Declaration in 2007 and the APEC Forest Ministers meeting Statement in September 2011 in Beijing made commitments to “combat illegal logging”, however made no mention of using trade bans.  The United States’ position in TPP negotiations seeks to impose trade bans in negotiations with a few countries, rather than negotiate a position with APEC members as agreed.

Marantis boasted about the United States plans to include “illegal logging”, illegal trade in CITES listed species, illegal fisheries and the implementation of ‘extra-territorial’ measures to deter trade in environmentally harmful goods.   However, a closer look at issues such as ‘illegal logging’ shows that it is nowhere near as big an issue as claimed by the United States, Britain and environmental NGOs.  These measures are merely an excuse to impose more barriers on exports from developing nations.

In short, the United States appears intent on using the TPP negotiations to bypass international enforcement and negotiation of environmental rules and impose them under multilateral agreements – which come with the implicit threat that if the environmental barriers are not agreed to, no other trade barriers will be lower.

The United States has claimed to have deliberately targeted the TPP negotiations to introduce these measures because of the high level of biodiversity and ‘illegal’ trade in the Asia Pacific region.  Developing nations which are a party to the TPP negotiations must ask now themselves – are the United States using TPP negotiations to impose environmental trade barriers which are aimed at fundamentally undermining the trade competitiveness of produce from developing nations?

 

WTO Appellate Body rules against United States in tuna labelling dispute

The World Trade Organisation Appellate Body has backed the decision of the Dispute Settlement Body and has found against the United States in the long running dispute with Mexico over the labelling of Tuna products.  The finding sets another precedent in the conflict between free trade and the environment which has ruled against an environmental trade barrier.

The Tuna-Dolphin case involved a complaint made by Mexico against a United States voluntary labelling scheme for Tuna products.  The scheme involved the United States Government allowing companies to label their tuna as “dolphin-friendly” if the tuna was caught in a manner which was deemed acceptable.

The United States had ruled that the Mexican tuna fisheries did not conform to high enough standards, despite meeting all international standards and obligations.  As a result, Mexican tuna was not allowed to be labelled as “dolphin-friendly”.

Mexico has argued consistently that this voluntary labelling standard represents a trade barrier against Mexican imports and was unjustified given that Mexico already complied with the Agreement on the International Dolphin Conservation Program.  Mexico also argued that despite the measure being voluntary, in practice it acts like a mandatory labelling standard.  The Appellate Body backed this notion by finding that a non-mandatory standard can be seen as a technical regulation.

The Appellate Body’s ruling comes as another piece of precedent which has found that environmental trade barriers are unacceptable under the WTO.

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