The Environmental Area Initiative (EAI) Approach to the WTO Negotiations and Environmental Goods and Services: Linking Trade Policy and Climate Change

Recognition of the potential of the multilateral negotiations on environmental goods and services (EGS) to contribute directly to climate change mitigation objectives has grown markedly among the WTO membership. This is evident in the major shift of focus in the recent submissions and proposals, from goods and services relevant to environmental protection, rehabilitation and sutainability, to those pertinent to climate change, including a proposal to link the negotiations with  the Clean Development Mechanism (CDM). The Doha Round has stalled but continuing submissions reflect an optimism and interest by Members to reach an agreement in an area that has grown even more in importance since the negotiations were launched in 2001. The observed trend in the proposals further reflects an urgency among the membership to address the enormous challenges of climate change, and lends support to growing global acknowledgment of the link between climate change and trade and the call to direct the negotiating focus on climate-friendly goods and technologies. 

Discussion on climate-friendly goods will inevitably need to confront the issue of non-tariff barriers (NTBs) in general, and standards and labelling, in particular. While the negotiating mandate on EGS is aimed at the reduction or, as appropriate, the elimination of tariff and non-tariff barriers, and even as the importance of NTBs is widely recognized, there is a lack of  proposals. This deficiency has rendered the negotiating exercise lopsided. The negotiations have focused on  tariffs and on environmental services while the mandate to negotiate on NTBs has largely been ignored. This situation, however, is expected to change. In March 2010, proposals on the subject have been received from Brazil and Japan. 

The Environmental Area Initiative (EAI) approach to negotiating EGS in the WTO, proposed by Cottier and myself (UNCTAD 2009; WTI 2009), may be an alternative and more viable approach to linking trade negotiations and climate change mitigation policies. It is not limited to negotiating tariffs and services commitments but addresses the complexity of issues by organising negotiations on the basis of specific targets and goals, and can be viewed as a consolidating approach by bringing together all WTO issues pertinent to the environmental goal identified (in this case, climate change mitigation). The approach, moreover, gets around the limitations and legal incompatibility of negotiating approaches proposed by the WTO membership until 2008.

The negotiating outcome of the EAI approach will be the drafting of an EGS framework agreement that translates the mandates of the Doha Declaration into specific obligations, and addresses linkages with other WTO areas of relevance to EGS. Previous publications by Cottier and myself have outline the  operationalization of EAI, but fall short of expanding on the non-tariff-related mandate and related issues. In this paper, the EAI approach is developed further to now include NTBs, focusing on standards. By exploring the case of organic products, which belongs to the category of environmentally-preferable products (EPPs) and the sector where standards and labelling  are most  prevalent, the paper aims to draw insights for dealing with standards and voluntary labelling in the EGS negotiations. The significance of standards and labelling in the context of climate change requires a broad discussion and clarification of WTO rules applicable to standards. This paper presents issues that need to be dealt with in the discussion that is expected to be generated by the recent WTO proposals, and recommend steps that Members could take to address them. A shorter section of this paper will cover technology transfer, and how the EGS negotiations can assist in putting into concrete terms Kyoto Protocol commitments through complementary measures and commitments in relevant WTO policy and regulatory areas. Possible modalities for negotiating EPPs will be outlined in the section that covers the recommendations on provisions that should be considered in the drafting of an eventual EGS framework agreement.