 RESTRICTED  
WORLD TRADE  WT/CTE/M/14  
 25 June 1997  
ORGANIZATION  
 (97-2614)  
 
Committee on Trade and Environment  
 
 
 
 
REPORT OF THE MEETING HELD ON 21 -22 MAY 1997  
 
Note by the Secretariat  
 
 
1. The Committee on Trade and Environment met on 21 -22 May 1997 under the chairmanship of 
Ambassador Björn Ekblom of Finland.  The agenda contained in WT O/AIR/578 was adopted, with the 
addition of the issues of observer status for international intergo vernmental organisations and rules of 
procedure.   
 
2. The Chairman  outlined some basic objectives of the Committee (CTE) for 1997 which were based 
on his informal consultations.  During the course of 1997, the CTE should:  (a) broa den and deepen the 
analysis of all Items on the work programme;  (b) widen participation in support of this analysis;  and (c) 
produce a brief factual report to be submitted to the General Council in December, with possibly 
recommendations on the CTE's wor k in 1998.  The CTE's analysis would be based on the thematic clusters 
of market access and the linkages between the multilateral environment and trade agendas.  
 
3. This meeting would deal with the Items on the work programme relate d to market access, whilst 
the September meeting would address those Items relevant to the linkages between the multilateral 
environment and trade agendas.  The Chairman would hold open -ended informal consultations to discuss 
the format of the September me eting.  He invited Members to provide suggestions on which Secretariats 
of multilateral environmental agreements (MEAs) should be invited to contribute to the September meeting.  
The November meeting would focus on Items 9 and 10 and on the CTE's report to  the General Council.  
 
4. In order to widen participation in support of the CTE's work, the WTO Secretariat, on its own 
responsibility, had organized a WTO Symposium on Trade, Environment and Sustainable Development 
("NGO Symposium" ) with representatives of business, environmental and developmental organizations, on 
20-21 May.   
 
5. The representative of the European Communities  said the CTE should not exclusively address 
matters related to market access when dealing with the Items for this meeting, but, in accordance with its 
terms of references, should adopt a broader perspective.  The representatives of the United States  and 
Japan  agreed that the thematic clusters should not limit the discussion.  The repres entative of Nigeria  
recalled that consensus had already been achieved to cluster the Items around themes.  The representative 
of Venezuela  said market access issues were important for developing countries.   
 
6. The Chairman  said the intention of structuring work around thematic clusters was not to limit the 
discussion, which should be able to accommodate any relevant issues delegations wished to address in order 
to deepen the analysis.  
 
 WT/CTE/M/14  
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Observer status for international in tergovernmental organizations  
 
7. The CTE agreed  to extend observer status to the African, Caribbean and Pacific Group of States, 
the Convention on International Trade in Endangered Species of Wild Fauna and Flora and the UN 
Framewo rk Convention on Biological Diversity.   
 
Rules of procedure  
 
8. The Chairman  said it had not yet been possible to reach agreement on the CTE's rules of 
procedure.  At this stage, time would be better spend on a substantive discussi on of the Items on the work 
programme.  However, if any delegations had proposals which they considered would be acceptable to all, 
or should they find further flexibility with respect to their position, he invited them to inform him.  He 
would keep the Co mmittee informed of any developments on this matter.  
 
9. The representatives of Morocco  and Peru asked that documentation be available in advance of the 
September meeting in French and Spanish.  
 
Item 2  The relationship between environmental policies relevant to trade and environmental measures 
with significant trade effects and the provisions of the multilateral trading system  
 
10. The representative of the Environmental Protection Ag ency of the United States  made a 
presentation of his delegation's experience with environmental reviews of trade agreements and policies.  
He said this was not the only way to carry out environmental reviews and the United States had not carried 
out review s exactly the same way each time.  Since the decision to negotiate the NAFTA in 1991, the United 
States had voluntarily undertaken environmental reviews of a number of environmental policies and 
agreements.  Two reviews had been conducted of the NAFTA and an environmental report had been 
submitted to Congress when the Uruguay Round Agreements had been submitted for legislative approval.  
Reviews were largely procedural to ensure that policymakers considered likely environmental effects of trade 
policies and  substantive responses in the form of mitigating steps, where necessary.  These reviews had been 
cooperative, interdepartmental undertakings, coordinated by USTR, which had identified environmental 
policy issues raised by new trade policies and potential e nvironmental benefits of removing trade distortions.  
Although the causal link between trade liberalization and specific environmental impacts of proposed trade 
policies could not always be established in advance, reviews brought to policymakers' attention  the concerns 
of a wide range of constituencies.  A transparent public process to resolve policy conflicts ensured the 
development of mutually supportive trade and environment policies and built public support for, and 
confidence in the policy approach.  
 
11. The first review for the NAFTA, which had involved extensive public hearings, consisted of a review 
of the relationship of the environments of the countries involved;  the principle elements of the proposed 
NAFTA;  the environmen tal issues raised for the United States;  and preliminary conclusions on the 
potential environmental effects for the United States and recommendations for policymakers.  Each 
NAFTA Party had conducted a review of impacts within their country.  A second rev iew of the NAFTA 
had also been submitted to Congress.  An Environmental Side Agreement to the NAFTA had been 
concluded which dealt in parallel with, and addressed environmental issues raised by the negotiations.  
 
12. An Environmental  Report on the Uruguay Round Agreements had been prepared in 1994, with 
public input on the environment and the Uruguay Round.  This Report considered trade and environment 
issues raised by the existing GATT and looked at the new Uruguay Round provisions w hich potentially 
could have affected US environmental laws and regulations, focusing on the preamble, the SPS, TBT and 
Subsidies Agreements and the dispute settlement procedures.  There also had been a consideration of 
possible general macro economic and i nvestment effects, implications for the protection of intellectual 
property rights and sectoral effects in agriculture, environmental technology and services, transportation, 
energy and minerals.  Not all environmental issues raised in this Report's prepar ation had been addressed 
in the Uruguay Round Agreements.  Thus, the Report had set out how the United States could address            WT/CTE/M/14  
            Page 3 
 
these issues in the future, including in the CTE.  Copies of these reviews could be consulted in the 
Secretariat.  
 
13. In response to the representative of Venezuela 's question on whether the United States had found 
it necessary to have a review mechanism to verify the potential effects, the United States  responded that the 
environmental reviews had been procedur al, whereby comments had been solicited and the information 
received had been assessed to determine which issues to address.  In response to the representative of 
Peru's question as to whether environmental reviews would be conducted in the future and for the sectors 
which had not yet been addressed, he said the United States intended to continue performing reviews 
although the precise format would vary.  The sectoral analysis had been organized around the comments 
which had been received.   
 
14. The representative of Nigeria  asked what the relationship between environmental reviews and 
impact assessment was and whether the United States intended to make a proposal on environmental 
reviews.  He enquired as to how the United Stated reco nciled the issue of environmental reviews with the 
CTE's mandate.  He enquired as to whether the United States, Canada and Mexico would consider 
presenting information on their environmental reviews of the NAFTA on the scope of the review;  an 
estimate of the costs;  the broad results of the review;  and the methodologies employed.   
 
15. The representative of the Environmental Protection Agency of the United States  said there was no 
legal requirement that the United States undertake environmental reviews, but it expected to continue to do 
so as necessary and appropriate.  Although many countries carried out environmental impact assessment 
and reviews were commonly performed, their application to trade agreements was a more recent 
phen omenon.  Environmental reviews had been discussed in the context of the CSD and OECD Members 
had voluntarily taken on an obligation amongst themselves to undertake reviews.  Although the United 
States had submitted a proposal on environmental reviews (WT/C TE/W/37), the purpose of this 
presentation had not been to reiterate this proposal but to enhance the CTE's understanding.  
Environmental reviews were a useful way of ensuring appropriate policy structures were in place at the 
national level.  
 
16. The representative of Mexico  said the WTO did not have the competence to deal with 
environmental reviews.  The WTO's main concern was trade;  therefore the CTE should examine trade 
reviews.  One suggestion would be to examine the existing en vironmental agreements and those under 
negotiation to review their trade effects and cost effectiveness.  These examinations should be carried out 
at the national level.  As the CSD and UNEP were developing methodologies for environmental reviews, 
she enqu ired as to what the United States considered the WTO's role to be in this regard.  
 
17. The representative of the Environmental Ministry of Mexico  said the design of environmental 
reviews had been a useful exercise in the context of N AFTA.  However, their actual elaboration had been 
costly and time consuming and the results were not determinant, as the reviews analysed complex factors 
which were dynamic and which included considerations other than the environment.  The exercise 
underta ken in NAFTA was not necessarily a model which could be copied.  However, environmental 
reviews could help to verify environmental concerns, such as, for example, the legitimacy of eco -labelling, 
whether it promoted environmental protection, and whether it  was an unjustified trade barrier.  
 
18. The representative of India  said the basic issue of the linkages between trade and environment had 
not yet been determined.  Paragraphs 48 and 181 of the Report referred to this issue by seekin g further 
analysis on the relationship and comparability of general trade and environmental principles.  India would 
like more discussion on these linkages and how they promoted sustainable development based on its non -
paper on Item 2 (dated 23 July 1996).   India's proposal dealt with trade principles in paragraphs 6 to 26 
and environmental principles in paragraphs 3, 4, and 27 to 36.  Several of these principles were already 
contained in the Report, such as in paragraphs 167, 171, 183 and 207.  India welco med suggestions for 
altering or adding to these principles, if it were felt that its non -paper lacked balance.  India was not 
proposing any recommendations, but to fulfil the CTE's mandate to initially address matters relevant to 
trade and environment.  Th e principles in India's non -paper were relevant to all Items.  WT/CTE/M/14  
Page 4 
 
19. The representative of Pakistan  said confusion existed on the scope of Item 2 and the formulation 
of Item 2 should be deconstructed.  It would be logical to determine w hat the environmental policies were 
and their impact on WTO provisions.  He referred to paragraph 181 of the Report which noted that further 
work would be required on this Item, not specifically on environmental reviews, which fell outside the scope 
of Ite m 2.  A productive discussion could build on India's proposal.  Although he had no problem with 
environmental reviews of trade agreements at the national level, he failed to see where such a discussion 
would lead.  
 
20. The representa tive of Sierra Leone  asked if the United States required environmental reviews from 
countries with which it entered into trade agreements;  what the record of mitigating environmental effects 
was;  what mitigation depended on;  and how long reviews took.  
 
21. The representative of the United States  responded that the more countries performed 
environmental reviews, the more likely that synergies would be possible between trade and environment.  
Concerning the record of mitigation, the  types of problems and responses identified varied.  In the initial 
review for the NAFTA, the United States had cooperated with Mexico to deal with changes in trade patterns 
along the border.  The process of environmental reviews took a considerable amount  of time in order to 
allow for public input.   
 
22. The representative of Argentina  said Item 2 had been designed to cover issues which were not 
covered under other Items.  Although it was difficult to oppose undertaking environmental reviews at the 
national level, he enquired as to what the implications at the international level were.  He asked if the United 
States would be willing to provide technical assistance to governments to carry out environmental reviews of 
trade agreements and whether the reviews would be limited to the provisions contained in the trade 
agreements, or also incl ude trade policies applied according to relevant WTO disciplines.   
 
23. The representative of Japan  supported the need to review environmental agreements from a trade 
perspective.  Japan's understanding of environmental reviews had been enhanced by the United States' 
presentation.  He referred to the contribution of transparency and notification of trade -related 
environmental measures, which was part of Item 4.  Domestic coordination was important and had been 
highlighted by Japan at  the NGO Symposium.  
 
24. The representative of Norway  said, although the preparation of environmental reviews was 
primarily a task of national governments, it was on the CTE's agenda as stated in paragraph 181 of the 
Report.  Environ mental reviews were a means to check whether trade liberalization contributed to 
sustainable development.  The CTE could discuss whether further work should develop a check list of 
methodologies in the WTO to assist governments in undertaking reviews.  Alt hough trade reviews of 
environmental agreements might be useful, MEAs were the appropriate fora to undertake them.  
 
25. The representative of Brazil  said his delegation had no difficulty in discussing environmental reviews 
of trade a greements as presented by the United States.  He asked what the United States' view was on the 
role of other fora, such as the CSD, on environmental reviews.  
 
26. The representative of Canada  said the genesis of this issue was the OE CD Joint Session of Trade 
and Environment Expert Group's recommendation on environmental reviews of trade agreements and trade 
reviews of environmental agreements.  The issue was a matter of domestic policy coordination.  Canada 
also had conducted environm ental reviews of the NAFTA and the Uruguay Round.  At the same time, 
when negotiating environmental agreements, Canada had considered the trade impact in order to arrive at 
a position which reflected domestic interests.   
 
27. The re presentative of the United States  said his delegation's intention had been to deepen the CTE's 
understanding of environmental reviews.  Instead of focusing on previous proposals, it would be worthwhile 
to examine issues from an analytical perspective.  Con cerning Brazil's question on the role of other fora, he 
said this work should be supported.  In the CSD Report to the UN General Assembly's Special Session, 
there was strong language calling for the use of environmental impact assessment.  Work on this iss ue in            WT/CTE/M/14  
            Page 5 
 
UNEP and OECD should not be duplicated.  The CTE could endorse environmental reviews and 
recommend them as a useful tool at the national level.  Responding to Argentina's question, he said there 
would not be any notification requirement.  He invited delegations to submit copies of their reviews to the 
Secretariat for Members' consultation.  As to why the focus should be on environmental reviews of trade 
agreements, he said the WTO was the forum in which trade agreements were negotiated.  In this respe ct, 
there was much to gain from greater participation of trade policymakers in environmental negotiations.  
Concerning further work on the principles in India's proposal, he said these had been drawn from the trade 
rules and would be difficult to summarize  or interpret.  
 
28. The representative of Peru asked whether technical assistance to prepare environmental reviews 
was being considered.  He said that the CTE could go further than just giving recommendations;  it should 
discuss crit eria which could lead to binding recommendations to evaluate environmental policies with trade 
effects.  In this regard, he referred to the general principles in India's proposal.  
 
29. The representative of the European Communities  said the United States' presentation was useful 
and responded to paragraph 181 of the Report.  India's proposal was not balanced as it did not include 
relevant environmental principles, such as the precautionary and polluter pays principles and the obligati on 
to cooperate to protect the global commons.  
 
30. The representative of New Zealand  said the discussion demonstrated the difficulty in dealing with 
specific recommendations on Item 2.  The general theme which had been highlighted, and which 
permeated all CTE work, was the importance of effective coordination between the environment and trade 
sides of governments.  Whilst this might be the extent of agreement at this stage, proposals would remain 
on the table until such time as aspec ts could be taken forward.  
 
31. The representative of the Philippines, on behalf of ASEAN , said the CTE should examine  India's 
proposal.  
 
32. The representative of Venezuela  asked whether the purpose of analysing the principles in India's 
proposal would be to reach recommendations, such as non -binding guidelines.  He proposed informal 
consultations to determine which principles to examine and what could be achieved.  
 
33. The Chairman  invited delegations to contribute their national experiences to advance the 
discussion.  Given the CTE's aim this year to broaden and deepen the analysis, it might not be constructive 
to discuss recommendations at this stage .  Although discussion could evolve to this end, the focus should 
be on developing a deeper understanding of the issues.   
 
Item 3(a ) The relationship between the provisions of the multilateral trading system and charges and 
taxes for environmental purpose s 
 
34. The representative of Switzerland  referred to WT/CTE/W/47, which established a basis on which 
to discuss environmental taxes and WTO provisions.  As mentioned in paragraph 66, the issue of whether 
WTO provisions provided for border tax adjustment of taxes on inputs incorporated or exhaust ed in the 
production process had not yet been clarified.  The conclusions of the 1970 Working Party on Border Tax 
Adjustment that "while this area of taxation was unclear, its importance - as indicated by the scarcity of 
complaints reported in connection w ith adjustments of taxes occultes  - was not such as to justify further 
examination" were no longer valid considering the importance of environmental considerations in the 
policies of many countries.  The time had come to further the examination.  These tax es were particularly 
interesting in the context of environmental policy since they acted on the behaviour of polluters;  a polluter 
who had to pay for pollution emissions had an incentive to reduce pollution.  This incentive would lead to 
the search for pr ocesses and products which were more environmentally sound for economic reasons.  
Eco-taxes were easy to apply and were a logical supplement to the regulations already adopted.  On 1 July 
1997, Switzerland would introduce incentive taxes on volatile organi c components and extra light heating oil 
to combat air pollution.  WTO provisions had been taken into account when these instruments had been 
drawn up.  Switzerland was prepared to make a presentation on these taxes at the September meeting.  WT/CTE/M/14  
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35. The representative of Japan  said WT/CTE/W/47 could be further developed to deal with non -
product -related production and processing methods (PPMs).  In view of the implications of border tax 
adjustment for competitiveness, the paper could inco rporate trade and environmental policy perspectives, 
particularly in light of the forthcoming meeting of the Convention of the Parties (COP) to the UN 
Framework Convention on Climate Change in Kyoto in December 1997.   
 
36. The repre sentative of India  said WT/CTE/W/47 gave a good overview of various environment -
related trade policy instruments and their economic and trade implications.  The section on dispute 
settlement collated the relevant parts of the analytical index and GATT/WTO jurisprudence.  The 
relevance of discussing non -product -related PPMs and competitiveness effects would have to be determined.  
Paragraphs 19, 21 and 22 of WT/CTE/W/47 gave some guidance and offered scope for further discussion, 
especially regarding their i mpact on market access.  India's non -paper on Item 2 also contained relevant 
guiding principles.  
 
37. The representative of Argentina , referring to paragraph 10 of WT/CTE/W/47, said subsidies also 
had an important effect on commodity  prices, particularly if production costs were  not reflected.  
Concerning paragraph 15, the tax base "may dwindle over time" depending on the flexibility of demand.  
He said interest in eco -taxes and charges would be heightened after the COP of the Conven tion on Climate 
Change.  Economic instruments, such as taxes, had an advantage over command and control measures as 
they were more transparent and did not affect the functioning of the market.  CTE work on border tax 
adjustment would have an impact on gove rnments' decisions.   
 
38. The representative of Australia  said WT/CTE/W/47 served as a good basis for the discussion.  
Although the CTE should not preempt outcomes in other fora, it would be useful to discuss the use of 
environmenta l taxes after the COP of the Convention on Climate Change.  
 
39. The representative of the European Communities  said environmental taxes were increasingly used 
to promote internalization of environmental costs and to change consumptio n and production patterns.  
Such taxes and charges would likely be subject to increasingly attention, particularly in the Convention on 
Climate Change.  Legal uncertainties existed on the interpretation of WTO rules on border tax adjustment, 
including seve ral provisions in the Subsidies Agreement.  This issue had horizontal implications and 
applied to all, not solely environmental, taxes and charges.  
 
40. The representative of Mexico  said WTO rules allowed for adjustment of taxes and charges on 
products, but not on PPMs.  Japan had suggested further analysis of PPMs and competitiveness.  With 
respect to the latter, she referred to paragraph 169 of the Report which set out that:  "WTO Member 
governments are committed not to introduce WTO -inconsistent or protectionist trade restrictions or 
countervailing measures in an attempt to offset any real or perceived adverse domestic economic or 
competitiveness effects of applying environmental p olicies".  She enquired as to how the environmental 
value could be quantified with respect to border tax adjustment and how feasible and environmentally 
effective this instrument would be.  These issues should be included in an analysis of border tax adjus tment.   
 
41. The representative of Canada  said WT/CTE/W/47 was a comprehensive analysis of border tax 
adjustment.  Although the PPM issue was sensitive, it could be clarified.  Paragraph 19 referred to the 
potential for double taxat ion on imported products.  The temptation existed to adjust taxes where lower 
environmental standards existed in the importing country.  Also, there would be less inclination to provide 
credits where higher environmental standards existed.   
 
42. The representative of Norway  said, although the regulatory approach had dominated 
environmental policy, more attention was being given to economic instruments to attain environmental goals 
in a cost efficient way.  As environmental concerns g rew, cost efficiency would be emphasized in order to 
internalize environmental costs.  Also, an increased use of economic instruments would stimulate 
innovation in pollution -control technologies.  Environmental policies also were used in conjunction with 
employment policies.  Studies suggested it would be possible to attain gains in employment through the use            WT/CTE/M/14  
            Page 7 
 
of environmental taxes and charges combined with reductions in other taxes.  As stated in WT/CTE/W/47, 
several constraints existed on the use of econo mic instruments, i.e. the valuation and competitiveness 
problems, which made it politically difficult to introduce neutral eco -taxes.  If eco -taxes were coordinated, 
the competitiveness issue would not constitute a problem.  However, governments might exem pt from taxes 
industries exposed to foreign competition and set eco -taxes below the optimal level.  Another way to 
alleviate competitiveness effects was to use border tax adjustment.   
 
43. The use of economic instruments was subject  to WTO rules on the application of domestic taxes 
and charges to traded goods.  In cases where environmental problems stemmed from consumption, the 
application of border tax adjustment to neutralize competitiveness effects should be possible according to 
WTO rules.  Complications arose with eco -taxes designed to solve problems related to production 
processes which generated transborder or global environmental problems.  The problem was to determine 
which taxes were eligible for border tax adjustment.  From  an environmental and cost -efficiency point of 
view, it had been argued that border tax adjustment should be extended.  However, this raised several 
concerns:  (i) risk of protectionist abuse;  (ii) non -product -related PPM issues;  (iii) technical and 
admi nistrative difficulties;  and (iv) in certain cases, risk of providing unintended incentives for suppliers as 
the extended use of border tax adjustment might discourage improving environmental performance.  
Further work should address border tax adjustment  of eco -taxes and the use of other economic instruments.  
 
44. The representative of Egypt  asked if border tax adjustment served the purpose and was viable from 
an economic perspective;  whether it was environmentally effective and WT O-compatible.  Imposition of 
taxes, per se , was valid, but eco -taxes were imposed on a phenomena which was not quantitative.  Forcing 
producers to incorporate environmental externalities by imposing taxes on products made with polluting 
PPMs was based on t he assumption that the costs of the polluting firm and the damage function of the 
polluted firm were known.  This was more complex if an importing country attempted to make adjustments 
at the border on "like" products.  She asked what would be an internati onally -acceptable and appropriate 
pollution tax.  Even the positive effects of applying border tax adjustment, such as curtailing environmental 
damage, inducing cleaner production, and raising revenue for environmental protection, was not of direct 
benefit  to developing countries.  The negative competitiveness effects and sovereignty issues concerning 
environmental standards should be addressed.  The effectiveness of border tax adjustment for PPMs 
contradicted the widely held view that environmental problem s should be addressed at their source as it 
would be a value judgement and would constitute double taxation if countries already had dealt with the 
environmental problem.  Generally, it would be better if the tax were levied on the production and 
extractio n process of the environmental problems rather than on the resulting products.  Border tax 
adjustment raised the issues of the extraterritorial impact of PPMs and WTO -compatibility.  The 
distinction should be made as to whether PPMs were product -related.  The use of border tax adjustment 
was complex and difficult to integrate in the WTO.  Although she questioned the relevance of this debate 
in the WTO, Egypt was willing to further the analysis, if necessary.  
 
45. The representative of  Korea  shared the concerns that border tax adjustment could entail potential 
protectionist risks.  Given the cost of compliance with environmental regulations, which represented only 
1-2 per cent of developed country production costs, there was no evidence  of resort to lower environmental 
standards to gain competitive advantage or investment.  Differences in environmental policies should not 
result in the introduction of compensating duties or import/export rebates.  Korea had difficulty with 
adjusting impo rted products at the border in order to balance the additional costs incurred by domestic 
industry in complying with non -product -related PPM -related requirements, which would have 
extrajurisdictional consequences.  The rebate of eco -taxes reduced their eff ectiveness, particularly if 
pollution arose from PPMs.  At this stage, there was no need to discuss the potential coverage and policy 
implications of border tax adjustment as only a few countries had introduced such taxes.  It was preferable 
to conduct an analysis of the feasibility, environmental benefits and potential disguised protectionism 
associated with adjusting taxes at the border based on PPMs.  
 
46. The representative of Morocco  referred to the feasibility of border tax adjus tment, its  WTO -
compatibility and the consequences for developing countries.  Environmental impacts were often 
connected to PPMs.  In this context, developing countries would require financial assistance.  If market WT/CTE/M/14  
Page 8 
 
access were affected by border tax adjus tment related to the use of certain PPMs, this would be WTO -
incompatible.     
 
47. The representative of the United States  said WT/CTE/W/47 updated GATT/WTO work on taxes 
and charges.  Section  II presented a good overview of the gene ral theory of the desirability of economic 
instruments for environmental purposes and set out the limitations of price -based measures to address 
environmental issues, which could have been expanded.  Although the paper referred to the benefits of 
economic measures in terms of transparency in their operation, transparency of the process by which these 
instruments were designed had yet to be addressed.  The manner in which individual interests might obtain 
exemptions from the application of economic instrumen ts could be non -transparent and subject to capture.  
Section III noted that the coordinated use of price -based instruments could achieve environmental goals 
while avoiding technical and political constraints, which reflected the Climate Change negotiations .  Apart 
from the difficulty of agreeing on a common approach, there would be significant competitiveness issues 
raised by a coordinated use of an eco -tax set at a level to induce changes in consumption or production 
patterns.  Section IV was well done, al though it drew on only one panel in dealing with "like" products and 
did not discuss other WTO jurisprudence.  Discussion on border tax adjustment should be kept separate 
from that on Climate Change.  
 
48. The representative of Argentina  said the issues related to border tax adjustment on charges and 
taxes went beyond PPMs, as had been indicated by Norway, and included issues such as who collected the 
revenue.  If a government wished to reduce local environm ental effects of a PPM, such as industrial 
effluents, either the polluter avoided producing the externality or paid the tax.  However, if the externality 
were global and the polluting emission entered the atmosphere, for example, the problem was who would 
receive the revenue and how would it be used.  If it were a matter of consumption, there might not be any 
trade issues.  Nevertheless, in the case of energy, PPMs were only part of the problem as externalities could 
be related to consumption.  
 
49. The representative of Nigeria  recalled that there had only been a preliminary investigation of this 
Item and looked forward to Switzerland's presentation on eco -taxes.  Paragraph 182 of the Report noted 
that scope existed under WTO provision s for governments to apply environmental charges and taxes.  He 
said the potential implications of these measures should be examined, taking into account international 
policy coordination in this area.  He referred to Argentina's question of who collected the revenue from 
eco-taxes and charges, which was an important aspect with respect to paragraphs 48 and 49 of 
WT/CTE/W/47 and the energy section of the informal Secretariat paper on Item 6.  Tendencies for 
charges and taxes on externalities were conflictin g.  There were arguments for tax rebates on exported 
products.  Based on future discussions on taxes and charges, Nigeria would continue to analyse the 
following issues:  PPMs and WTO rules;  competitiveness effects;  difficulties in assigning values to 
environmental externalities;  double taxation;  risk of protectionist abuse;  extraterritoriality;  and the 
need for policy coordination.  
 
50. Concerning further work on Item 3(a), the Secretariat  said several delegations had addressed the 
need to elaborate various aspects of environmental charges and taxes and border tax adjustment.  Further 
work also could take into account the results of the COP of the Parties to the Convention on Climate 
Change , as well as environmental valuation and effectiveness.   
 
Item 3(b ) The relationship between the provisions of the multilateral trading system and 
requirements for environmental purposes relating to products, including standards and 
technical regulations,  packaging, labelling and recycling  
 
51. The representative of Canada  said WT/CTE/W/45 indicated the extent of work underway in other 
fora on eco -labelling.  He noted the UNEP Expert Group's report, Eco-labelling and Trade:  A 
Cooper ative Approach , which had been issued as a non -paper (dated 6 March  1997) in the TBT 
Committee (CTBT) and contributed to discussions of equivalency of eco -labelling.  The priority should be 
to implement paragraph  185 of the Report, which stressed the impor tance of following the provisions of 
the TBT Agreement and its Code of Good Practice for government sponsored eco -labelling programmes,            WT/CTE/M/14  
            Page 9 
 
without prejudice to Members' views on non -product -related aspects of these programmes.  Canada had 
notified the work pr ogramme of its Environmental Choice programme in 1996 and looked forward to other 
Members notifying their programmes in the interests of transparency.  Canada's experience indicated that 
complying with the procedural and substantive provisions of the TBT C ode of Good Practice addressed 
trade concerns, while maintaining an environmentally -credible eco -labelling programme.  As indicated in 
the NGO Symposium, Canadian business was concerned about the development and implementation of 
eco-labelling programmes.  Future CTBT work on eco -labelling should take into account ISO 14000 
standards on eco -labelling and life -cycle assessment.  The OECD's study, Eco-labelling:  Actual Effects of 
Selected Programmes , was a useful reference for further work on this Item.  
 
52. The representative of Brazil  said this Item remained a priority for Brazil.  WT/CTE/W/45 could 
be periodically updated and the analysis on the market access impact of eco -labelling furthered.  Paragraph 
185 of the Report provided a basis for action under this Item, particularly on transparency of eco -labelling 
programmes.  The Report set out the importance of following the TBT Agreement's transparency 
provisions and its Annex 3.  This discussion would continue in the CTE and the CTBT .  The particular 
importance of ensuring fair access to eco -labelling schemes was underlined in the Report, as well as the 
relevance of identifying equivalency mechanisms between exporting and importing countries.  As a result 
of paragraph 185 of the Repor t, Brazil was taking the necessary steps to discuss with governmental and non -
governmental sectors the notification of its Green Seal eco -labelling scheme to the CTBT.  At this stage, 
the Green Seal scheme was in a preliminary phase where products and crit eria were still being discussed.  
Sectors such as leather, shoes, paper and timber would likely be covered.  Notification of the Green Seal 
scheme at this early stage would allow Brazil to proceed according to the TBT provisions, whereby interested 
parties  would have the opportunity to become acquainted with the scheme and to provide comments on 
their own local production criteria.  Transparency in this process offered the opportunity for Brazil to 
contemplate different or additional criteria on an equivale ncy basis thus ensuring the Green Seal scheme 
would not be considered as a disguised barrier on imported products.  The Brazilian Association of 
Technical Standards, the standardizing body responsible for the preparation and application of Green Seal, 
and the Brazilian Ministry of Trade and Industry considered that notifying the Green Seal scheme to the 
CTBT would increase transparency in this important area of environmental policymaking.  
 
53. The representative of Japan  agreed on the  need to implement the Report's recommendations.  
Based on the concerns raised by developing country NGOs, Japan was interested in addressing ISO 14000 
in further CTE work.  He noted the OECD's eco -labelling study which focused on market, trade and 
environ mental impacts of OECD Members.  The April meeting of the OECD Joint Session had decided 
to work on green government purchasing, which was relevant to eco -labelling and might have trade 
implications, and packaging.  The Codex Alimentarius Commission's work  on guidelines for labelling of 
organic products had yet to be concluded, but they did not cover "acceptable amounts of soil fertilizers and 
conditions to be used" in organic production as stated in WT/CTE/W/45.  He had difficulty with the idea 
of the Secr etariat undertaking an independent study on the market and trade effects of eco -labelling.  
 
54. The representative of the European Communities  said WT/CTE/W/45 should be updated with 
reference to the Global Eco -labelling Network and to recent developments in ISO and the OECD.  The 
OECD eco -labelling study contained useful information.  He said procedures to review the EU eco -
labelling scheme had just been initiated;  the Commission had recently tabled a proposal for consideration 
by the Council on procedural principles for establishing eco -labelling criteria which envisaged that non -
European Union interested parties should be given the same opportunity to be involved and contained a 
provision according to which small and medium size en terprises (SMEs) in developing countries would be 
given preferential treatment for fee payment.  
 
55. The representative of Hong Kong  said WT/CTE/W/45 served as a basis for CTE work on eco -
labelling.  As eco -labelling had significant  market access implications, work in intergovernmental 
organisations (IGOs) should take into account WTO principles, particularly concerning the interests of 
LDCs in formulating eco -labelling schemes.  Hong Kong welcomed the fact that some IGOs, such as IT C 
were taking into account CTE work.  The CTE should formulate a proposal on its role in this field in the 
interest of coordinating with IGOs and ensuring WTO concerns were taken into account.  Some of the WT/CTE/M/14  
Page 10 
 
recommendations arising from IGO work could be bui lt upon to establish a set of reference principles for 
eco-labelling, including the need for transparency, adequate consultation, consideration of market and trade 
impacts, the special needs of LDCs, sufficient allowance for adaptation, harmonization of st andards, 
scientific and technical evidence, and acceptance of equivalency and mutual recognition.  
 
56. The representative of Australia  said WT/CTE/W/45 showed that other fora were undertaking 
interesting work on eco -labelling.  There  was scope for further discussion on the relationship between eco -
labelling schemes and the TBT Agreement.  Differences of view remained on the treatment of eco -labelling 
criteria involving life -cycle analysis, i.e. on the extent to which standards based o n unincorporated PPMs 
were or should be covered by the TBT Agreement.  General agreement existed on the desirability of eco -
labelling schemes, as standardizing bodies, to adhere to the TBT Code of Good Practice.  The CTE could 
examine whether the TBT Agree ment's provisions and the TBT Code were adequate to address the issues 
raised by eco -labelling, focusing on:  (i) the applicability of the TBT Agreement to labels, irrespective of the 
kind of information provided on the label;  (ii) the disciplines that sh ould apply to eco -labelling schemes, 
as standardizing bodies;  and (iii) the extent to which the criteria used by these schemes in awarding labels 
to particular products were standards or technical regulations.  
 
57. A relevant consideration was the CTBT's decision that the obligation to notify mandatory labelling 
requirements was not dependent on the kind of information which was provided on the label, whether or 
not it was in the nature of a technical specification.  While this only applied to mandatory labelling 
requirements, it pointed to a significant principle, i.e. that labels were fully covered by the TBT Agreement.  
Labelling requirements directly related to food safety were covered by the SPS Agreement.  Eco -labelling 
schemes could be expected to involve at least some criteria related to a product's characteristics or 
performance.  In this case, the eco -labelling scheme, as a standardizing body, would seem to be covered by 
the TBT Agreement.  Where there may be  uncertainty was in the context of whether all the criteria used 
by an eco -labelling scheme were covered by the TBT Agreement, i.e. the respective status of criteria dealing 
with product characteristics and incorporated PPMs, and those relating to unincorp orated PPMs.  PPMs 
was a generic issue underlying the trade and environment debate and its consideration in the context of eco -
labelling might have ramifications for the consideration of PPMs elsewhere.  The CTE could investigate 
the adequacy of the TBT Ag reement's disciplines, including the Code of Good Practice, in addressing eco -
labelling schemes.  For example, were these disciplines adequate to ensure transparency in criteria 
development and to provide effective opportunities for exporting country produ cers to contribute to criteria 
development and implementation.  
 
58. The representative of Egypt  said WT/CTE/W/45 could have included relevant conclusions on eco -
labelling in international fora, such as UNCTAD and the OECD.  Further S ecretariat analysis of eco -
labelling should focus on its market access effects.  In order not to confine the discussion of this Item to 
eco-labelling, Egypt suggested further analysis of standards, technical regulations, and packaging.  It would 
not be use ful to discuss ISO 14000 in the CTE as this would already be taking place in UNCTAD.  In 
October, the UNCTAD Expert Group would examine the operation and possible trade and investment 
impacts of environmental management standards, particularly ISO 14000, o n developing countries.  
 
59. The representative of Colombia  referred to a study, Reconciliation of Trade and Environment 
Policies in Colombia , prepared by Colombia's National Planning Department, Ministry of Foreign Trade 
and Univers idad Externado.  In general, Colombian exporters interviewed for this study were concerned 
about the costs of eco -labelling, which, in some cases, had significantly affected market access for Colombian 
exports, specifically for bananas and textiles.  In th e textile sector, the costs of meeting the criteria to obtain 
an eco -label exceeded the benefits, including those related to the use of chemicals.  Some Colombian textile 
companies had ceased to export products to some developed countries due to these cost s and the 
consideration that without the eco -label the products could not compete.  Exporters of bananas had 
indicated that adaptation costs to fulfil eco -labelling requirements exceeded the benefits and had a negative 
market access impact.  Several Colomb ian exporters, particularly in plastics and food, had been affected by 
packaging requirements in some developed countries.  Technical procedures required in some packaging 
standards were unclear and could be used for protectionist, as opposed to environmen tal aims.  Increased 
transparency and more information on eco -labelling and packaging would address some of these concerns.             WT/CTE/M/14  
            Page 11 
 
The TBT Agreement had a role to play in this regard.  It would be important to study ISO 14000 and 
equivalency and mutual recogniti on of eco -labelling.   
 
60. The representative of Pakistan  said, in the absence of empirical proof of the success of eco -labelling 
schemes in determining consumer choice, discussions could be academic.  WT/CTE/W/45 indicated that 
many studies would be carried out in other fora, including the UNIDO survey on the m arket access effects 
of eco -labelling, and ISO and UNCTAD work.  The manner in which ISO carried out its work should be 
addressed.  The Secretariat should continue to analyse eco -labelling, packaging and recycling.  
 
61. The represent ative of Nigeria  supported the educative process in the CTE this year, which should 
take into account other fora's work.  The CTE's role should be defined to clarify the direction of further 
work.  Canada had drawn attention to the importance of the CTBT's  discussions, including taking into 
account life -cycle analysis of eco -labelling in the stages of production, distribution, consumption and 
disposal.  He proposed that the Secretariat prepare a paper which would examine eco -labelling, and 
include:  (i) mar ket access impacts;  (ii) implications of government procurement policies;  (iii) 
competitiveness issues;  and  (iv) relationship to WTO rules.  Joint CTE/CTBT meetings should also be 
considered.  
  
62. The representative of India  said WT/CTE/W/45 helped to further an understanding of other fora's 
work on eco -labelling.  He was concerned about ISO's international character, especially with respect to 
SMEs.  Also, the market access impacts of eco -labelling had not been adequately reflec ted in 
WT/CTE/W/45.  Regarding Canada's call for eco -labelling schemes to be notified, he said that since eco -
labels were, by and large, based on LCA, they were not covered by the TBT Agreement.  Hence, Members 
could not be forced to notify.  However, volu ntary notification would help to increase the understanding of 
eco-labelling schemes.  Regarding special treatment for developing countries in the EU revision of its eco -
labelling scheme, documents from the NGO Symposium indicated that this would not suffi ciently take on 
board SME concerns.  For example, reducing the fees from 0.15 to 0.10 per cent of trade levels was not an 
adequate incentive to incur the capital, technological and other costs.  On the CTBT's work, he said forum 
shopping was unhelpful and would consume the time of two Committees on the same issue.  India 
supported broadening the discussion based on national experiences, such as presented by Colombia.  India 
had established an Institute of Packaging which recognized market access obstacles d ue to packaging 
practices.  Hong Kong had referred to the need for guiding principles, for which India's non -paper on Item 
2 could be helpful.  
 
63. The representative of Chile  supported Canada's proposal for Members to notify their e co-labelling 
programmes to the CTBT and for further analysis of the TBT Agreement.  
 
64. The representative of Morocco  said WT/CTE/W/45 illustrated developing country concerns.  
The Secretariat could highlight conclusions of other for a and update the CTE on ongoing eco -labelling 
work.  He said the CTE should further define the parameters of the discussion and examine the 
transparency of criteria, conformity assessment procedures, market access effects, and WTO rules on eco -
labelling.  
 
65. The representative of Canada , commenting on the coverage and application of the TBT Agreement 
to eco -labelling programmes, said experience indicated that progress would be unlikely at this stage in either 
the CTE or the CTBT.  It  was counterproductive to discuss what the rules were, although there might be 
merit in discussing what the rules should be.  He felt that it was Members' responsibility to address the 
market access implications, in terms of asking domestic industry groups  what the concrete problems and 
market impacts were.  Colombia's input was helpful in terms of understanding the impacts of eco -labelling.  
Canada had done this for the forestry sector, which had indicated that concerns with the EU programme 
were not about  current market access, but about the medium and long term impact of increasingly "green" 
consumers.  He recalled that ISO 14000 was being discussed in the CTBT.  UNCTAD's work was 
important, but was not an alternative to discussing eco -labelling in the WT O.  Other organizations' work 
on a more general policy level could feed in to WTO discussions.  On forum shopping, he said Canada 
preferred the discussion to take place in the CTBT at the appropriate time, which would not likely be this WT/CTE/M/14  
Page 12 
 
year.  As the CTBT had an Agreement around which the discussion could focus, eco -labelling could 
migrate there at the appropriate time.  Although there was no obligation, per se , in the Report to notify eco -
labelling programmes to the CTBT, there was a clear political messag e to do so.   
 
66. The representative of Mexico  said that none of the studies set out in WT/CTE/W/45 contained 
the final word on eco -labelling issues.  Reference had been made to the OECD eco -labelling study, which 
outlined that eco -labelling had not had any real market impact.  In this light, it was i nteresting to learn of 
Colombia's experience.  She said this year should be used for an exchange of national experiences so as to 
assess concrete concerns in this area.  Colombia had referred to adaptation costs which were relevant to 
competitiveness.  Env ironmental efficiency and effectiveness of eco -labelling had yet to be fully determined.  
In many cases, criteria had been found to be based on environmental conditions in the country of design.  
Concerning a joint CTE/CTBT meeting, at this stage it might be more productive to discuss the issues in 
the CTE without entering into an examination of WTO rules.  Transparency was not limited to notification 
and included issues such as access to eco -labelling programmes and participation in criteria development.  
She suggested it would be useful for the Secretariat to prepare a paper, similar to WT/CTE/W/45, on other 
fora's work on eco -packaging and recycling.  
 
67. The representative of the United States  said he was surprised at the amount of  time which was being 
spent on this Item, given the criticism that too much time had already been spent on eco -labelling.  He said 
that as there was little information on the market effects of eco -labelling, presentations such as Colombia's 
were useful.  C ommenting on Nigeria's suggestion to work on government procurement, he said 
government procurement was not covered by multilateral disciplines and would lead into a discussion of 
applicable WTO provisions to which not all Members were Party.  He noted tha t eco -labelling was 
designed to change market behaviour and such effects should not be considered to be negative.  He agreed 
that a discussion of eco -labelling and WTO rules in the CTBT would not necessarily be productive at this 
stage.   
 
68. The representative of the European Communities , commenting on the issue of forum shopping, 
said that migration of issues was difficult to manage.  Whereas eco -labelling was mentioned explicitly in the 
CTE's work programme, the issues it raised w ent beyond the CTBT's mandate.  There might be a 
disconnection if work on the same issue were conducted in two different WTO Bodies.  
 
69. The representative of Japan  shared Canada and the United States' view on discussing the legal 
aspects of eco -labelling and WTO rules.  Conclusions from the OECD eco -labelling study noted that 
empirical evidence so far had not revealed any significant trade effects of eco -labelling.   
 
70. The representative of Nigeria  said wor k on government procurement as it related to eco -labelling 
might be more relevant in light of WTO work established by the Singapore Declaration, which pointed to 
the eventual establishment of rules in this area.  He raised the issue of when the CTE could d ecide to make 
a recommendation on issues for which no possibility of further progress existed in the CTE to be discussed 
in other Committees which administered Agreements.  This had been raised with respect to Canada's 
request to discuss eco -labelling in t he CTBT, especially given that it might be unproductive to continue 
discussions in the CTE.  He suggested that this matter could be addressed in informal consultations.  
Although Nigeria had no national experience with eco -labelling and it had not confront ed any difficulties in 
this respect, it was concerned about the rule making implications of eco -labelling.   
 
71. The representative of Canada  referred to the Canadian and the European Communities' 
submissions to the TBT triennial re view outlining that eco -labelling should be addressed.  It would need to 
be determined where and when it would be appropriate to discuss this issue.  
 
72. The Secretariat  said it would continue to update delegations on work on eco -labelling and packaging 
in other international fora, particularly with respect to market access effects and including the relevant 
conclusions.  In this context, Members were invited to submit any relevant documentation on their national 
experiences with eco -labelling and packaging and the market access effects.  The Secretariat would inform            WT/CTE/M/14  
            Page 13 
 
the Chairman of the CTBT of the suggestion by several delegations to hold a joint CTE/CTBT meeting.  
The OECD eco -labelling study was available on Internet and in hard cop y. 
 
73. The representatives of Mexico  and Norway  said the discussion was not mature enough to be taken 
to the CTBT.  The representative of Mexico  said that if the matter were to be discussed in the CTBT it 
would be to discuss rules.  At this stage, her preference would be to further analysis in the CTE on all 
aspects of Item 3 based on Members' national experience.   
 
 
Item 4The provisions of the multilateral trading system with respect to the transparency of trade measures 
used for environmental purposes and environmental measures and requirements which 
have significant trade effects  
 
74. The repr esentative of Hong Kong  said the CTE could be more ambitious under this Item.  
WT/CTE/W/46 raised questions on the implementation of the Environmental Database (EDB) and its 
linkage to the Integrated Database (IDB).  Concerning the mode of delivery, an ele ctronic on -line delivery 
of the EDB with user -friendly searching facilities should be made available to Members, including retrieval 
by way of key words.  He supported developing such a system in phases.  Hong Kong had an open mind 
concerning the Document Dissemination Facility (DDF) and welcomed Secretariat advice on the technical 
considerations involved and the overall cost effectiveness.  It would be difficult for Members to be consulted 
in every case on the selection and classification of information.  As demonstrated in Section II of 
WT/CTE/W/46, the Secretariat had the competence to undertake this work.  Members could supplement 
this work by providing advise on a voluntary basis.  Product classification in the EDB should be as specific 
as possible, inc luding the identification of Harmonized System codes.  
 
75. The representative of the United States  said the rationale behind the decision to create the EDB 
was to centralize and make information more readily available on environment -related notifications, and not 
to create any new notification requirements, or for the Secretariat to expend resources manipulating the 
contents of current notifications.  The optimum form of the EDB could be drawn from all three options in 
WT/CTE/W/46.  T he Secretariat could:  (i) on a frequent basis, collect all environment -related 
notifications and make them available to Members;  (ii)  prepare and update periodically an index of these 
notifications as a W/ document;  and (iii) disseminate this index on -line for use as a guide to finding 
documents in DDF.  Deciding which notifications to include in the EDB was a more complex task given 
the lack of any agreed definition of what constituted an environmental measure.  For instance, the United 
States had doubt s as to whether to include measures taken to promote plant varieties or to develop genetic 
resources, or relating to patent protection for the protection of plant varieties.  
 
76. The United States felt that instead of negotiating whi ch notifications to include in the EDB, the 
Secretariat's judgement should be relied on, with the understanding that the inclusion of a notification in the 
EDB would be without prejudice to what constituted an environmental measure, or which measures were 
relevant to CTE work.  In addition to the areas for inclusion in the EDB in paragraph 9 of WT/CTE/W/46, 
certain SPS notifications were also relevant.  The use of key words to search the Central Registry of 
Notifications (CRN) was a promising suggestion.  T he EDB should not be used to analyse the trade effects 
of environmental measures as notifications would not contain the necessary quantitative information.   
 
77. The representative of Norway  said WT/CTE/W/46 furthered work on paragraph 192 of the 
Report.  As the CTE had a cross -sectorial responsibility for trade and environment, it was useful to have an 
overview of trade -related environmental measures.  Information should be collated annually  and made 
available as a W/ document and via the DDF.  To ensure automatic classification, a notification format 
should be drawn up so as to require national authorities to indicate whether a measure had an environmental 
purpose.  Accordingly, relevant WTO  Bodies would have to change the format of their respective 
notifications.  Given that environmental notifications should not be treated more onerously than others, it 
was not a priority for the EDB to contribute to a quantitative analysis.  Norway did not  see a role for 
information external to WTO notifications to be included.  The practice of providing supplementary 
information on select environmental policies in the TPR should continue.  WT/CTE/M/14  
Page 14 
 
 
78. The representative of Brazil  said that a mong the different options available on the design of the 
EDB set out in WT/CTE/W/46, his delegation preferred the periodic collation of notifications of trade -
related environmental measures as a W/ document.  The Secretariat could work on the classificati on of 
measures to be contained in the EDB, particularly on key words, taking into account Members' input.  As 
noted in WT/CTE/W/46, it was not feasible to provide a quantitative analysis of the trade effects of 
environmental measures.  
 
79. The representative of the European Communities  said a combination of options (b) and (c) of 
paragraph  8 of WT/CTE/W/46 provided the solution for the design of the EDB, whereby notifications 
were collated on an on -going basis and disseminated through  an electronic system while at the same time 
made available periodically in a W/ document.  He said option (a) in paragraph 12 was preferable.  The 
CTE should not endorse any option which was not consistent with the 1996 Report of the Working Group 
on Noti fication Obligations and Procedures.  Work on the classification of the EDB should be left to the 
Secretariat.  His delegation did not see a role for the EDB to facilitate quantitative analysis of the trade 
effects of environmental measures.   
 
80. The representative of India  said the EDB provided a reference for notifications of trade -related 
environmental measures.  Options 8(b) and (c) of WT/CTE/W/46 should be followed.  The suggestion 
in paragraph 12(a) was sufficient at this stag e.  WT/CTE/W/46 had correctly classified "plant health" and 
"plant varieties" as they referred to specific WTO provisions.   
 
81. The representative of Colombia  preferred a separate EDB based on the CRN and accessible to 
Members elec tronically and in a W/ document.  Paragraph 8(b) and (c) were the appropriate options.  SPS 
measures should be included in paragraph 9.  He enquired as to how reference would be made to the TPR 
exercise.  The EDB could refer to the source of any external i nformation.  Further details were needed on 
what a quantitative analysis of the trade effects of environmental measures would entail before reaching a 
conclusion.  
 
82. The representative of Japan  preferred options (b) and (c) in para graph 8 and option 12(b).  the 
EDB should not be used to quantify the trade effects of environmental measures.  
 
83. The representative of Nigeria  said the EDB should be compiled from existing notifications in the 
CRN, as set out in p aragraph 192 of the Report.  He supported options (b) and (c) in paragraph  8 of 
WT/CTE/W/46.  Classification for the EDB could be undertaken by the Secretariat, including for Item  7.  
Nigeria had understood that the purpose of the EDB would be eventually t o assess the trade effects of 
environmental measures.  The EDB should be accessible through the Internet, which also should reach 
developing countries.  He referred to the Director -General's initiative to make technical assistance available 
to developing c ountries through the Internet.  With respect to the development of the EDB, he noted the 
limits of the terms of reference of the TPR in Annex 3.    
 
84. The representative of Peru said the options in paragraph 8 (b) and (c) of WT/CTE /W/46 could be 
combined.  Peru preferred option 12 (a).  For the time being, it was not necessary to modify the existing 
notification formats.  He agreed with Nigeria that the inclusion of environmental measures was outside the 
TPR mandate and should not b e considered in the EDB.  
 
85. The Secretariat  said it would look into the feasibility and cost implications of developing the EDB 
according to Members' responses to the options set out in WT/CTE/W/46.   
 
Item 6  The effect of environmental measures on market access, especially in relation to developing 
countries, in particular to the least developed among them, and environmental benefits of removing 
trade restrictions and distortions  
 
86. The Secretariat  introduced its informal paper (dated 7 May 1997) which had been prepared to 
serve as a starting point upon which to deepen and broaden the analysis for those sectors which had been            WT/CTE/M/14  
            Page 15 
 
referred to by Members as being of particular interest.  The paper was a preliminary response to requests 
to analyse a variety of sectors, including agriculture, forestry, fisheries, textiles and leather, non -ferrous metals 
and energy.  
 
87. The representative of the National Oceanic and Atmospheric Administration of the United States  
introduced her delegation's submission (WT/CTE/W/51) on the environment and trade benefits of 
removing subsidies in the fisheries sector.  Fisheries was a good example of a natural resource sector where 
remov ing subsidies would generate significant benefits for trade and the environment.  Subsidies tended to 
reduce internal costs and thereby exacerbate the problems of overcapacity and over fishing.  This problem 
was more acute for developing countries whose ec onomies were less diversified and who were more 
dependent on export earnings from their natural resources.  Subsidies also distorted trade, affecting prices 
and distorting sources of supply.  Their removal would provide a double dividend for both the envir onment 
and the global economy.  
 
88. The representative of New Zealand  introduced his delegation's submission (WT/CTE/W/52) 
which was designed to further the CTE's analysis of the relation between trade distortions and problems of 
fisheries resource sustainability.  There were strong reasons, from both the trade and environment 
perspective, to examine fishing industry subsidies and their relation to WTO rules.  Fishing industry 
subsidies affected the marine environment, the interests of developing countries and the ability of countries 
to ensure sustainable development.  There was scope for work to clarify which WTO Articles had a bearing 
on fishing industry subsidies and to consider whether these Articles adequately regulated these su bsidies.  
The CTE's consideration of these issues would contribute to work on Item 6.  Concerning the chart on 
page 5 of the informal Secretariat paper, he said that the level of fertilizer -use in New Zealand was about 
100-200 kg/ha.  However, the methodol ogy used in determining the figures was not clear.   
 
89. The representative of Egypt  said her delegation would comment on the submissions by the United 
States and New Zealand at a later stage.  In contrast to WT/CTE/W/1, the informa l Secretariat paper 
examined trade liberalization from a wider context than had been mandated, by linking the "effectiveness" 
of trade liberalization to domestic policies.  Analysis should be confined to the environmental benefits 
emanating from trade libe ralization, per se , and the discriminatory effects of environmental measures.  
WT/CTE/W/1 set out that trade liberalization generated new resources which could be used to reduce 
poverty, which was one of the principal causes of environmental degradation, a nd to pay for pollution 
prevention or clean -up.  A follow -up to this at the sectorial level would be relevant to the CTE's educational 
process.  She questioned references to cost internalization;  a concept which had been acknowledged was 
WTO -incompatible if it were applied beyond policies that addressed domestic consumers and producers 
or was forced on foreign producers.  The introduction focused on cost internalization and its direct link 
with trade liberalization;  this was an issue which it had been dec ided fell outside the CTE's mandate.  
Environmental cost internalization was not the only response to ensure that trade liberalization had an 
"optimal" beneficial environmental effect.  As countries moved to higher stages of development, growth 
became more  scale and technology intensive, which provided the necessary conditions for environmental 
gains.  As noted in WT/CTE/W/1, empirical evidence indicated sensitivity to environmental problems 
would rise along with real income and governments would use at lea st some of the resources resulting from 
trade liberalization to address environmental problems.  
 
90. A sectoral approach should define what was meant by "win -win" situations;  whether this meant 
"win-win" situations at the "global", "regional" or "national" level;  whether "win -win" situations were desired 
within sectors or between sectors;  and for which generation it would be a "win -win" situation.  The CTE's 
mandate was to examine whether additional market access could provide deve loping countries with 
opportunities to adopt higher environmental standards, not to ensure which domestic policy responses to 
trade liberalization had beneficial environmental effects or were more conducive for environmental 
protection.  Egypt was aware th at it needed technology, technical assistance, effective substitutes, and 
political will, but this went beyond the CTE's mandate into domestic policies, and would make market access 
a new form of conditionality for dictating domestic policies for environme ntal benefits.  The CTE should 
examine whether environmental policies had discriminatory trade effects.  It was beyond the point to 
examine compensating the adverse impact of environmental measures on sectoral performance, as set out WT/CTE/M/14  
Page 16 
 
in paragraph 15.  The same comment was valid for several other paragraphs where discriminatory trade 
effects should have been analysed.  
 
91. Concerning paragraph 20, she said the linear relationship between the reduction of tariff escalation 
and generatin g income could provide, in and of itself, an opportunity for countries to improve 
environmental protection, particularly as by far the most significant part of the relationship between trade 
liberalization and the environment passed indirectly via effects on levels and patterns of production and 
consumption, as set out in WT/CTE/W/1.  If there were an opportunity for environmental benefits it 
should be examined.  The analysis in paragraph  43 should be furthered drawing on WT/CTE/W/1, which 
stated that while  there had been, in general, a decline in tariff escalation, for products such as rubber, jute, 
lead, zinc and hides, skins and leather, the level of tariff escalation had increased in major developed country 
markets.  For textiles and leather, the focus s hould be on the opportunities created by trade liberalization 
and additional market access.  It was incorrect to state in paragraph 34 that problems of dying and tanning 
might intensify in the absence of new environmental policies.  Additional market acces s would enable 
exporters to use betters dyes, regardless of the domestic environmental policies in place.  Reference should 
be made to the absence of technology and appropriate raw materials, technical assistance and market 
premiums.  It was a quality effe ct from trade liberalization and not a question of new environmental policies.  
The CTE should focus on market access this year and the informal Secretariat paper should be revised for 
the September meeting.  
 
92. The representative o f Nigeria  welcomed the submissions by the United States and New Zealand.  
He said the CTE discussion turned on a configuration of three issues:  MEAs, TRIPs and market access.  
To date, insufficient attention had been devoted to market access.  In this res pect, he welcomed the 
informal Secretariat paper which pursued a sectoral approach based on paragraph 198 of the Report.  It 
could build on the methodological approach of examining the environmental impacts of trade liberalization 
and the market access eff ects of environmental measures for each sector.  Care should be exercised in 
making the types of presumptions in paragraph 3 on the effects of WTO commitments.  Reference in 
paragraph 4 to "textbook conditions" under which environmental costs would be inte rnalized should be 
delinked from the implementation capacities and willingness of developing countries to internalize 
environmental costs.  He enquired as to the purpose of the second sentence in paragraph  5, for which no 
empirical basis existed.  Paragrap h 15 was too general in dealing with the lack of market access effects of 
environmental measures, particularly in view of the discussion on Item 4, which had indicated there was no 
basis on which to assess the trade effects of environmental measures in the  EDB.  The trade and 
competitiveness effects raised in paragraphs 48 and 49 on energy needed to be further analysed.  He 
enquired as to the logic behind the concepts in paragraph 48 on border tax adjustment.  
 
93. The representative o f Argentina  said the submissions by the United States and New Zealand built 
on previous submissions on other sectors by other delegations under Item 6. Referring to the informal 
Secretariat paper, he said that in shifting the analysis from environmental be nefits to environmental effects, 
the CTE would not be addressing its mandate.  The paper's analysis of agriculture had focused on the local 
effects of subsidies on fertilizers.  A more complete paper should address the price effects of distorting 
trade pol icies.  Prices were the market mechanism through which to compensate different factors of 
production.  In such a market system, the environment might be undervalued.  Local effects were relevant, 
but should not be the CTE's focus.  The informal Secretariat  paper should be supplemented by an analysis 
of those trade policies which distorted international markets, such as market access restrictions, domestic 
support, and export subsidies.  In the case of agriculture, the list of distorting measures would inclu de those 
outside the Green Box.  The most relevant policies could be selected from this list and their possible 
environmental effects analysed.  Argentina had accepted environmental cost internalization in Principle 16 
of Agenda 21, but the objective of in ternalization should not be taken out of context.  It was one thing to 
say that internalization was a necessary objective and another to implement it on the basis of distorted prices.  
Until commodity prices fully reflected the private cost of production, which was the responsibility of the 
main producers and consumers, environmental costs could not be internalized.  The first step would be to 
identify and eliminate policy distortions which affected international prices.  Fisheries and agriculture were 
appropriate sectors on which to begin this analysis.  
            WT/CTE/M/14  
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94. The representative of Iceland  said the fisheries sector accounted for about 80 per cent of the total 
value of Iceland's exports and was the foundation of Iceland's economic prospe rity.  This dictated the 
necessity of sustainably managing fisheries resources.  Iceland's general policy to eliminate subsidies to the 
fisheries sector was clear for the reasons outlined by the United States and New Zealand and was a 
prerequisite for the success of conservation measures.   
 
95. The representative of the Philippines, on behalf of ASEAN , said the informal Secretariat paper 
dealt with the possible negative environmental effects of removing trade restrictions and distort ions, instead 
of the benefits.  Paragraph 28 implied that further reductions in tariff escalation in the fisheries sector were 
not necessarily good as they might result in new environmental problems.  The paper focused on the 
immediate environmental impact s of trade liberalization and not on trade as a means for developing 
countries to secure economic resources to devote to better environmental policies.  Improving market 
access for developing country exports of environmentally friendly products had not bee n reflected and 
should be addressed.  While a sector approach could provide the basis for an indepth analysis, it should 
not be a means by which to arrive at general conclusions.  As stated in paragraph 43, although tariff cuts 
were considered unlikely to lead to major changes in trade patterns in non -ferrous metals, this conclusion 
should not be applied across sectors.  Concerning paragraph 20, the issue of tariff escalation should not be 
complicated;  it would not be disputed that reducing trade barriers would provide increased market access 
opportunities which would contribute to enhancing income and could be used for environmental 
conservation.  She said further reflection was needed on paragraph 21 given that countries adopted forest 
management policies  in pursuit of sustainable development.  She said the paper did not adequately reflect 
the role increased trade and market access opportunities played in enhancing developing countries' income 
and promoting sustainable development.  It was a challenging ta sk to accommodate all delegations' interests 
and generalization which could lead to misunderstandings should be avoided.  
 
96. The representative of Japan  said that, although over fishing had been recognized worldwide, the 
effect of s ubsidies in the fisheries sector had not yet been determined.  As set out in paragraph  11 of the 
United States' submission, some subsidies were designed to encourage sustainable management of fisheries 
resources through education, training and information dissemination.  Environmentally beneficial subsidies 
should be dealt with differently from environmentally harmful subsidies, on a case -by-case basis.  Certain 
paragraphs of the informal Secretariat paper were not based on sufficient empirical evidence.  H e enquired 
about the rationale behind the causal link made in paragraph 13 between agricultural trade liberalization 
and increasing land prices and sustainable farming methods.  The paper failed to provide sufficient 
evidence for the argument on tariff esc alation.  On paragraph 11, fertilizer use was not necessarily linked to 
the PSE level, as in the case of New Zealand.  Although paragraph 2 only focused on the positive trade -
environment links, there were also negative links.  Discussants in the NGO Sympos ium had referred to 
these negative links, which the CTE should address.  
 
97. The representative of Canada  said the goal was to use the sector -specific analysis to draw general 
conclusions on synergies between trade liberalization and environmental objectives.  The broader, strategic 
issues which Canada would like to be addressed included zero -for-zero liberal ization initiatives, particularly 
in paper and allied industries and non -ferrous metals, and other factors that might impact on market access, 
such as eco -labelling and certification.  In some cases, MEAs might be the appropriate policy responses.  
In this  regard, Canada supported the proposed Forest Convention.  Paragraph 18 of the informal 
Secretariat paper could clarify the definition of forest products.  According to FAO, in 1994 less than 3.5 
per cent of roundwood production entered international trade  and more than half of that was made of fuel 
wood and charcoal which were mainly consumed locally.  Thus, the direct impact of trade measures on 
roundwood production was limited.  However, 20 -25 per cent of forest products (i.e. roundwood, 
sawnwood, pulp a nd paper) did enter international trade.  The trade impact on roundwood production 
had to be seen in the following context:  in 1994, about US$  114 billion of forest products entered 
international trade (roundwood accounting for 9 per cent).  In general, t here was a positive correlation 
between freer trade and sustainable forest management;  good environmental management made sound 
economic sense in the longer term.  Business representatives at the NGO Symposium had indicated how 
industry was adapting to co nsumer requirements in this area.  Referring to some apparent contradictions in 
the paper, he said in paragraph 20 it could not be said that "old growth forests might have been logged WT/CTE/M/14  
Page 18 
 
excessively," while asserting "the transition from old to second -growth forests was retarded or prevented".  
The issues were complex and involved land tenure and regulatory issues, which were best pursued in other 
fora. 
 
98. As business representatives had indicated at the NGO Symposium, there was a link  between market 
access and environmental goals.  Tariff escalation on paper compared to pulp resulted in double drying of 
the pulp, with consequent increases in energy consumption.  Encouragement of local production, even after 
factoring in transport consi derations, would likely result in energy savings, which was a strong rationale for 
zero-for-zero tariff initiatives in this sector.  There were alternative approaches on eco -labelling, as had been 
stated at the NGO Symposium, for which complementarity migh t develop as programmes evolved.  As 
clarified by business and other NGOs, eco -labelling in this sector was largely based on non -product -related 
PPMs.  Forest product eco -labelling was related to certification issues pertaining to sustainable forest 
manage ment.  Canada did not share the concern in the paper industry on the potential for protectionist 
abuse in well -designed certification programmes.  Certification was an important tool for encouraging 
sustainable forest management and the information it cont ained might be relevant in terms of possible eco -
labelling criteria.  The plurality of approaches demonstrated that eco -labelling was part of business reality 
and, as indicated by industry, likely to increase in importance.  The WTO should consider eco -labelling 
issues in a manner that respected environmental policy objectives and addressed trade concerns.  
 
99. Business representatives at the NGO Symposium had noted the environment and trade benefits of 
reduced tariff escalation betwe en metals in their basic and extruded form.  As Canada had indicated for the 
proposed OECD study on aluminum, the intensive energy use associated with non -ferrous mining activities, 
particularly in the aluminum industry, rested on some erroneous assumption s.  The reference in paragraph 
40 assumed all aluminum industry activities used high -intensity, thermal energy sources.  Canadian 
aluminum smelters used hydroelectricity, with its comparably low contribution to air pollution.  He noted 
that bauxite was alu minum in the raw form.  Economic incentives for recycling were substantial given the 
major cost savings in energy use, and favoured the broader environmental objective of recycling given energy 
and raw material savings.  While there were limits to the use of recycled aluminum, the extent of recycling 
was impressive.  This was a controversial issue in the Basel Convention and Canada supported efforts to 
develop criteria which took into account local capacity for recycling, and thereby addressed potentially 
arbitrary distinctions on where recycling should take place.  
 
100. The representative of Mexico  said the submission by the United States was helpful in defining the 
structure of the analysis on Item 6.  It first reflected the current situation in the fisheries sector, then referred 
to trade restricting and distorting measures and finally made proposals for their elimina tion.  Mexico had 
problems with the structure and content of the informal Secretariat paper.  As Argentina, she emphasized 
the importance of maintaining the discussion within the CTE's mandate and in the context of paragraph 198 
of the Report, whereby the CTE should identify potential "win -win" situations for both environment and 
trade.  In this respect, discussion of the environmental impact of trade liberalization would take the CTE 
away from its main objective under this Item.  In the Report, Members had  already recognized the need to 
apply appropriate environmental policies determined at the national level.  The CTE was not competent 
to decide which environmental policies should be applied at the national level by its Members;  CTE 
competence lay in dete rmining the potential environmental benefits which could be gained from removing 
trade restrictions and distortions, and enhancing market access opportunities, particularly for developing 
countries.  She suggested that the Secretariat prepare a new paper a ccording to the orientation set out in 
the Report.  
 
101. The representative of Korea  said certain fisheries subsidies did not contribute to overcapacity and 
over fishing and, in some cases, could facilitate the industry's transition t o a more sustainable mode.  In 
Korea, subsidies which had a structural effect on the fisheries industry were environmentally beneficial.  
Korea would comment on the submissions by the United States and New Zealand at a later stage.  
Concerning the informal  Secretariat paper, he said that, although agricultural practises could impose 
environmental damage, such as soil and water contamination due to intensive pesticide and fertilizer use, 
there were also positive effects.  An OECD seminar in September 1996 ha d shed light on the 
environmental benefits of agricultural practices, including for landscape preservation, biodiversity            WT/CTE/M/14  
            Page 19 
 
protection, and flood and landslide prevention.  He cited examples from a recent OECD Report 
"Globalization and Environment," which ana lysed agricultural liberalization and its associated scale effects.  
Any analysis of the relationship between agricultural liberalization and the environment should examine the 
positive and negative aspects and take into account socio -economic conditions, food security concerns and 
sustainable development for each country.  Sustainable development was a broad concept which comprised 
not only environmental protection, but sustained economic growth and social development.  Agenda 21 
emphasized the importance of increasing food production and enhancing food security.  Potential benefits 
of removing trade restrictions and distortions should be defined, but only after an assessment had been 
made of the current situation.  Korea could not agree with the last sente nce of paragraph 12 and the 
assumption in paragraph 13 that a shift from intensive to extensive agricultural production could guarantee 
positive environmental effects, particularly in developing countries where land degradation might be 
increased.  
 
102. The representative of India  said the submissions by the United States and New Zealand  were  in 
line with the need to deepen CTE work.  Environmental subsidies also had competitiveness and market 
access effects, especially for developing countries.  The informal Secretariat paper neither reflected the 
wording of Item 6, nor captured previous CTE discussion.  There were two sides to the discussion:  the 
environmental benefits of removing trade restrictions and distortions, and the need to safeguard and 
enhance developing country market access.  Although the paper's scope was limited to a few aspect s of 
removing trade restrictions and distortions, it missed the environmental benefits.  The focus had been on 
the effect of environmental measures on domestic policy, rather than on trade liberalization.  Reference in 
paragraph 1 should be made to additio nal access to markets and technology for developing countries to 
generate additional resources for environmental protection.  Analysis in paragraphs 14 to 17, 22 and 30 
needed to be buttressed by an analysis of the market access effects for developing coun tries, including 
available empirical studies.  On paragraph 17, more work was required on trade protection through non -
tariff barriers with reference to the TBT, SPS, Agriculture, Textiles, TRIPs and GATS Agreements.  The 
problem posed at the end of paragr aph 28 could be overcome if better environmental measures were in 
place.  For developing countries, this could happen only by increasing resources generated from exports 
and higher value added which would result in more resources for environmental purposes .  The solution 
to issues raised in paragraph 23 lay in encouraging small developing country operators using less mechanized 
means.  He drew attention to paragraph 197 of the Report with reference to Japan's statement on beneficial 
subsidies.  Subsidies af fected developing country competitiveness differently from developed countries.  
He said reference had been made at the NGO Symposium not only to potential, but existing protectionism 
which affected developing country market access.  
 
103. India's non -paper on Item 6 (dated 20 June 1996) was relevant for an understanding of the issues.  
Paragraph 7(iii) had been addressed in submissions by Argentina and Australia.  There needed to be a 
further understanding of paragraph 7 (i) and (ii).  Particular attention should be given to SMEs, as noted in 
paragraphs 8, 16 and 17.  Discussion should continue on Item 6 at the September meeting and the 
Secretariat should revise its informal paper.  India intended to raise the market acces s aspects of Item 8 at 
the September meeting.  
 
104. The representative of Peru said the informal Secretariat paper only reflected part of the CTE's 
mandate on Item 6;  it noted the negative environmental effects of removing trade dist ortions, but did not 
examine the environmental benefits.  Analysis should be furthered on incentives for environmentally 
friendly products from developing countries, positive measures and promotion of environmentally sound 
technology and technical assistan ce for developing countries.  
 
105. The representative of the European Communities  recalled his delegation's position as set out in its 
non-paper on Item 6 (23 July 1996).  He reserved the right to comment on the informal Secretariat paper 
and the submissions by the United States and New Zealand.  Analysis of the environmental benefits of 
trade liberalization should take into account the fuller picture.  The analysis of the energy sector could be 
expanded by giving attention to the relationship between energy use and the environment, particularly as 
regards climate change.  In preparatio n for the September meeting, he requested the Secretariat to prepare 
a synopsis of GATT/WTO jurisprudence on the application of Article XX to environmental measures.  
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106. The representative of Hong Kong  said the informal Secretariat paper should develop the positive 
trade -environment links.  Hong Kong appreciated the inclusion of textiles and leather, which had been 
among the most severely regulated and distorted sectors affecting LDCs.  The potential environmental 
benefits of removin g these distortions should be studied, as well as the trade effects of environmental 
measures in sectors more prone to disputes, such as fisheries.  
 
107. The representative of Switzerland  suggested his delegation's comments on the inf ormal Secretariat 
paper could be submitted to the Secretariat, particularly with respect to the chart which had been included 
in the TPR for Switzerland in 1996.   
 
108. It was agreed  that in order to give all delegations the opportun ity to make statements on Item  6, 
the discussion would continue at the September meeting, after which the Secretariat would prepare a new 
paper.  