Trade and Environment Newsletter – Issue 10, July 2012

WTO members express concern over use of ‘private import standards’ as non-tariff measures

In the 2012 annual report of the WTO, the Director-General, Pascal Lamy, warned about the continuing trend towards the adoption of protectionist barriers by nations following the global financial crisis.   A new feature was expression of concern by WTO members about the growing use of private standards as non-tariff barriers.

Lamy also voiced his concern that the continuing growth in protectionism may indicate that a number of countries regard protectionism as a long-term growth strategy, not just short-term mitigation against the effects of the global financial crisis.

The increase in the use of non-tariff measures (NTMs), particularly technical barriers to trade (TBT) and sanitary and phytosanitary (SPS) measures, has been recognised by Director-General Lamy as constituting “a clear trend in which NTMs are less about shielding producers from import competition and more about the attainment of a broad range of public policy objectives”.

Of particular interest was the reference in the report to concerns raised by member nations about “the proliferation of non-tariff barriers implemented through national standards and, in particular, the increasing use of private standards and of SPS measures that are considered not to be based on scientific standards”.  This statement indicates a growing discontent with the use of private, voluntary certification standards as mechanisms to restrain and control trade.

The World Wildlife Fund and some EU members such as the Netherlands are now arguing for “sustainable” rather than “free” trade and proposing that tariffs be lowered for products certified under the private certification standards which they sponsor.  The WWF has declared its intent to “transform markets” by using such standards to control supply chains.

Lamy has called for the international community to gain a greater insight into the use of NTMs for public policy objectives and in particular, the motivations of WTO members.

 

Australian illegal logging bill stalls in Parliament

The Opposition Liberal Party in Australia has refused to support a bill proposed by the Government to ban illegal timber products. It has sidelined the Bill because the Government had not produced enabling regulations.

The Bill was pushed by Greens and environmental NGOs, but there has been a backlash in Australia against excessive and onerous environmental regulation.

The Bill was proposed by environmental groups as part of the global campaign to use trade restriction to halt illegal timber imports.

Both the US and the EU have implemented measures to achieve this.

The British Government has led and funded this campaign.  Prime Minister Cameron likened this and other climate change campaigns to moral global issues similar to Britain’s campaign against slavery in the nineteenth century.

In response to commitments made to environmental groups, the Australian Government has drafted legislation which will not only hinder legitimate imports, but will burden Australian timber producers with a requirement to adopt a legality verification system – despite the fact there is no incidence of illegal timber harvesting in Australia.

These requirements are the result of inexpert advice of how to fire proof this trade restriction from legal challenges at the WTO. Recent rulings on use of other environmental measures to restrict trade strongly suggest the Australian measure would be struck down.  Indonesia has threatened to do so if Australia enacts the proposed measure.

 

Palm oil industry urges Indonesia to challenge EU Renewable Energy Directive in WTO

Indonesian Palm Oil Producers’ Association (Gapki) has urged the Indonesian Government to initiate proceedings in the WTO against the European Union’s Renewable Energy Directive.

Executive Director of Gapki, Fadhil Hasan, has requested that the Indonesian Government file a formal complaint to the WTO over the EU’s Renewable Energy Directive (RED) on the grounds that the Directive amounts to a trade restriction which constrains the importation of palm oil into the EU.

Mr Hasan also stated that the Renewable Energy Directive was based on inaccurate and flawed calculations of the greenhouse gas emissions from palm oil.

The EU measure has been questioned by Brazil, Indonesia, Malaysia, and the United States.

The trade restrictive policies of the EU may have resulted in a backlash from Indonesia, where a “sweeping new import restriction” known as Regulation 27 has been implemented. It is reported that Regulation 27 intends to tighten Indonesian import restrictions to ensure that imports do not interfere with Indonesian national economic development goals.

The new Indonesian regulations target the importation of horticultural goods, finished goods and the exportation of mining resources in a way that importation licenses are restricted to those producers who use imported goods for manufacturing in Indonesia – as to not compete directly with local Indonesia goods on the market.  Japan and the US are contemplating filing a complaint on this measure at the WTO.

 

US Congress reverts to Green Protectionism

In two recent actions, the members of the House of Representatives have endorsed Green Protectionism – first by calling on the Administration to reject a WTO ruling that restrictions on Mexican imports of tuna are unwarranted protectionism and must be removed; and second by the House leadership striking down an amendment to remove “over criminalization” from an Act which bans imports of illegal products.

The House of Representatives Committee on Natural Resources, under ranking Democrat Edward Markey, has written to President Obama urging him to ignore a ruling by the World Trade Organisation  that US a labelling law unfairly blocks imports of tuna from Mexico.

Mexico complained to the WTO that US laws governing the labeling of products as ‘dolphin friendly’ effectively denied supply of Mexican tuna to the US market.  It pointed out the measure  was unjustified because Mexico already complied with requirements to protect dolphin as a party to the Agreement on the International Dolphin Conservation Program.  The WTO Appellate Body found the US measure Body constituted an unallowable technical regulation which restricted Mexican tuna imports.

The House Natural Resources Committee argued that the United States’ decision to participate in the Uruguay Round was “never intended to allow non-discriminatory, voluntary labelling regimes like the dolphin-safe labels to be a subject of this type of trade dispute”.  The Committee urged President Obama to reject the WTO’s finding that the dolphin-safe label was discriminatory and to withhold foreign aid to Mexico if they raised concerns over the failure of the US to comply with the WTO ruling.

The ruling has significant implications. Increasingly, WTO decisions seem to be falling back to a general test – does the measure restrict trade?

The Congressional Leadership also set aside a Bill supported by a majority of members of Congress which served to cut measures from the Lacey Act which have been widely criticized for “over criminalization”. This bill has savage penalties for any US citizen who imports, even unknowingly, products which breach laws in the country of export.

Environmental groups have invoked the law against Gibson guitars for using timber product which is protected in Madagascar.

Protectionist interests have allied with Greens to ensure the bill can be used to block imports of timber alleged to be illegal.  It is a standard tactic of US ENGOs to allege forest products are illegal a part of their global campaign to halt forestry in developing countries.

A proposal to exempt composite timber from the reach of the bill (it being impossible to detect if composite timber included illegal product) lead representatives, including Republicans, to oppose it because the measure protected timber producers in their constituencies.

 

WTO strikes down US laws requiring country of origin labelling for meat imports

The WTO Appellate body confirmed a decision by a WTO panel that proposed measures in the US that required imported meat products or meat products that contained imported products to be labelled as to indicate how the meat had been handled, were contrary to the rules of the Technical Barriers to Trade Agreement.

Canada and Mexico, major exporters of beef to the US, protested the measure.  The US labelling rule required products containing imported meat to indicate that certain procedures had been followed.  These measures were costly and – it was argued – restricted the import of meat.

Canada and Mexico challenged the measure as discriminatory. The WTO panel, which first heard the case, concurred that the measure was discriminatory, but the Appellate Body decided there was not enough information to make an assessment.

The decision appeared informed by a judgement that the measure impeded imports.

 

Environmental expert warns of dangers of misuse of “certification”

The Professor of Environmental Management at the Australian National University, Jeff Bennett, has warned that while certification schemes may be intuitively appealing, deeper analysis reveals that their application may be inherently damaging to society’s well-being.

Writing for the East Asia Forum, he notes that in response to political pressure exerted by environmental groups such as Greenpeace, developed countries have introduced policies to restrict trade in timber, for example by requiring timber to be ‘certified’ as being produced ‘sustainably’, before it can be offered for sale.

Professor Bennett observes that because certification schemes effectively act as ‘gate-keepers’ to market access, the ability to gain certification becomes valuable to suppliers. In this context, who sets the certification standards and what the content of those standards are, achieves considerable significance. These matters often become the subject of lobbying activity, and so the certification process delivers outcomes determined by relative political influence and gives no guarantee of delivering socially desirable outcomes.

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