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What will be the fate of new market access policies based on sustainability criteria in the WTO?

Mathilde Dupré & Stéphanie Kpenou, 30 May 2023

[English] [français]

One year ago, the Veblen Institute filed two amicus curiae briefs in the WTO disputes opposing Indonesia and Malaysia to the European Union initiated respectively in March 2020, and April 2021. These are the first ever WTO disputes on climate change measures and the Institute argued that:

  • Environmental and climate measures do not violate the national treatment obligation simply because they may de facto adversely affect competitive opportunities for imported products vis-à-vis domestic products. Measures that have not been deliberately designed to protect the domestic industry, but pursue a non-protectionist, legitimate objective should not be deemed illegal;
  • Absent any international consensus on relevant sustainability criteria, States should not be prevented from adopting their own; they should have sufficient autonomy in deciding on sustainability criteria on which to base their measures of environmental protection/climate change mitigation, in accordance with the precautionary principle.

The ruling on the Indonesian case, which was expected already in Septembre 2022, has been delayed several times. A panel is not required to consider voluntary interventions by external parties. This being said, we hope that the successive postponements of the publication of the decision will have given the Panel plenty of time to consider the main elements of analysis that we have brought to its attention.

In a context of resurgence of conflicts over policies based on processes and production methods (“PPMs”) (as shown by the oppositions against EU’s CBAM, the imported deforestation and neonicotinoid regulations, cf. infra), the palm oil rulings may be landmark decisions on the WTO legality of environmental protection and climate change mitigation measures.

The Veblen Institute believes that environmental and climate objectives (enshrined as fully-fledged goals of the WTO) can only be achieved, in the absence of relevant international agreement, if WTO members retain sufficient regulatory autonomy to apply non-protectionist measures. Simon Manley, Former Chair of the Committee on Trade and Environment of the WTO, said it best when he suggested that WTO Members should look at all the options available for allowing countries to distinguish between products on the basis of how they are produced. Acknowledging that the “PPM” issue is “one of the big ‘grey areas’ in WTO law”, Manley believes that the debate should be addressed in depth given the climate emergency and the need to encourage the production and trade of low carbon goods (1).

Opposition at the WTO against several EU PPMs measures
  • At the WTO’s Committee on Trade and Environment meeting on 14 March 2023, the EU’s CBAM and deforestation regulation caused an outcry from India supported by other member States, like Brazil, Uruguay, Paraguay, Colombia, Nicaragua, Kenya, China, and Russia, but also industrialized countries like Japan and Korea that also raised some concerns about the CBAM. India presented a document criticizing the increasing use of unilateral measures to address climate change (2). From India’s perspective a CBAM implies privileging a one-sided policy of the importing country over those of the exporting countries and, therefore, imposes a unilateral vision of how to fight climate change. India argued that the CBAM violates the WTO agreements’ core rules and that the reduction of greenhouse gas emission should remain a global effort based on the principles of equity and common but differentiated responsibilities.
  • India also criticized the recent EU measure banning access to the European market of products containing neonicotinoid residues on environmental grounds. India expressed its concern that these measures are imposed without taking into account the differences in climatic and soil conditions around the world, which may undermine the link between these measures and the objective they are intended to achieve.
  • Regarding the regulation on imported deforestation, Indonesia and Brazil submitted a joint communication in November 2022 to the WTO Committee on Agriculture (3), regretting the EU’s choice to resort to unilateral legislation instead of an international commitment to deal with the objectives of conservation and sustainable management of forests and fight against climate change (4). The two countries express their conviction that "trade restrictions are inadequate to address environmental concerns" (5). They also point out that the regulation « disregards the local conditions and national legislations of developing producing countries, their efforts to fight deforestation ». An observer reported that Brazil and Indonesia, supported by Paraguay, Argentina and Ecuador, have reiterated their opposition to the EU’s approach during the last meeting of the Committee on Agriculture (held on 27-28 March 2023) (6). These countries raised once again the potential incompatibility of the regulation with WTO rules and its failure to recognize the different development statuses of producing countries.

(1) Borderlex, Interview – WTO needs to consider process and production methods, 20/10/2022 “if WTO countries were to embrace the PPM principle more clearly, it might create scope to deny tariff preferences in the future to products which did not meet agreed low-emission standards”.
(2) Job/TE/78“Concerns on Emerging Trends of Using Environmental Measures as Protectionist Non-Tariff Measures”. Access to this document is currently restricted, but an analysis is available here : WTO: India galvanizes South over North’s unilateral environment measures
(3) Joint Letter EU proposal for a regulation on deforestation-free products, submission by Indonesia and Brazil to the Committee on Agriculture, 29 November 2022
(4) They also express their concerns about "the uncertain and discriminatory nature of the scope of products; definitions that are not multilaterally agreed; retroactive cut-off date; burdensome due diligence mechanism and subjective risk assessment criteria; costly and impractical traceability and geo-localization requirements; and insufficient unilaterally defined transition period, which could increase costs and have negative social and economic consequences for developing countries". Ibid.
(5) Ibid
(6) Tweet from Rob Francis

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