The Hindu Business Line : WTO and eco-friendly trade

The preamble to the WTO agreement sets the goal of sustainable development, explicitly stating the need to protect and preserve the environment. There has been a resurgence of concern for establishing a relationship between environmental standards and trade.

During the Fifth Ministerial Conference of the World Trade Organisation at Cancun, Mexico, the issues discussed by the 148 countries included trade and environment. There has of late been a resurgence of interest in environmental standards and trade.

The WTO forerunner, the General Agreement on Trade and Tariffs, constituted as far back as in 1971 a group on `Environmental measures and international trade'. This was followed in 1991 by a scrutiny of the transparency of national environmental measures likely to have trade impact.

The preamble to the WTO Agreement has a direct reference to the goal of sustainable development explicitly stating the need to protect and preserve the environment.

WTO norms

The WTO formalised the issues by setting up a Committee on Trade and Environmental measures (CTE), which established a relationship between environmental standards and sanitary and phyto-sanitary measures and agreed, in principle, to negotiations without violating relationships among WTO rules, specific trade obligations of multilateral environmental agreements and rights of any WTO member that is not a party to the Measures of Environmental Agreement (MEA).

During the negotiations on trade the consensus was that environmental standards should not obstruct flow of regular exchange of information between the MEA and WTO committees, and negotiations should lead to reduction or elimination of tariff and non-tariff barriers to environmental goods and services.

The Marrakesh decisions on trade and environment mandated a work programme covering items of interest to developing and developed countries such as

The relationship between the provision of the multilateral trading system and trade measures for environmental purposes, including those pursuant to MEAs;

Eco-labelling, particularly the issue of whether national laws could fairly require the labelling of en-embodied process and production methods, that is, aspects of goods or services not identifiable in the final product;.

The effects of environmental measures on market access, particularly for developing countries as a whole and LDCs especially; and

Environmental benefits of removing trade restrictions and distortions. In more liberalised economies with high environmental standards, industries think that governments of poor countries lower their standards to keep the cost of production low and attract foreign investment and jobs from rich countries.

Identification of issues

The first step for regulation of environment is the classification and identification of environmental issues. Submitting a memorandum to the WTO, the Negotiating Group on Market Access and the Committee on Trade and Environment suggested that the WTO prepare a list of environmental goods subject to negotiations. The WTO has explicitly taken an integrated view that an open, equitable and non-discriminatory multilateral trading system can help achieve ecologically sustainable development and advance members' national and international efforts to better protect and conserve environmental resources. Developing countries, particularly agriculture exporters, have drawn attention to the environmental benefits of trade liberalisation and tighter WTO disciplines.

They argue that further liberalisation of farm trade will reduce the environmental impact of agriculture by increasing resource allocation efficiency. For instance, the removal of agricultural input subsidies should lead to a substantial reduction in the use of marginal agricultural land, which is only productive with high fertiliser, water and other inputs.

"The reality is that trade is a powerful engine of economic growth and that economic growth is vital to creating conditions that favour advancing environmental protection, improving social conditions or sustaining ethical values.

By opening markets, particularly to exports from developing countries and by keeping markets open through clear and enforceable rules, the global trading system is a natural ally of sustainable development."

India has followed environment management programmes from 1968. Many bodies, such as the State Pollution Boards, the Food and Drugs Administration, the Ministry of Environment and Forests and the National Environmental Engineering Research Institute besides NGOs, monitor environmental rule violations.

Regulatory mechanism

The Government has adopted the policy of Abatement of Pollution Programme, which provides for several mechanisms in the form of regulations, legislation, agreements, fiscal incentives and other measures to prevent and abate pollution. Yet, implementation is weak and environmental pollution is visible and rampant all over.

Not only villages, but urban areas, metropolitan cities, and industrial and commercial centres generate environment-damaging products and by-products. Both the agricultural and the industrial sectors — no doubt, the basis for the economic prosperity — impact the environment.The implementation of environmental standards necessitates import of expensive equipment and raw material, which would push up the cost of production of exportable and other goods.

In addition, European certification requires certain conditions to be observed in training of employees (technical staff), planning and preparation, pesticide record-keeping, disposal and post-harvest preparation. Clearly, the Government, the various industries and other sectors should be prompt in implementing environmental standards. Otherwise they would have to accept them under the WTO.

(The author is a former Economic Advisor to SEBI.)