RESTRICTEDWORLD TRADE
ORGANIZATIONWT/CTE/M/21
26 July 1999
(99-3131)
Committee on Trade and Environment
REPORT OF THE MEETING H ELD ON 29-30 JUNE 1999
Note by the Secretariat
1. The Committee on Trade and Environment (CTE) met on 29-30 June 1999 under the
chairmanship of Ambassador István Major (Hungary).   The agenda in WTO/AIR/1116 was adopted.
Observer status for international intergovernmental organizations
2. It was agreed to extend observer status to the United Nations Framework Convention on
Climate Change and the International Commission for the Conservation of Atlantic Tunas.
Items 1 & 5 The relationship between the provisions of the multilateral trading system and trade
measures for environmental purposes, including those pursuant to multilateral
environmental agreements;  and the relationship between the dispute settlement
mechanisms in the multilateral trading system and those found in multilateral
environmental agreements
3. In the light of the forthcoming Seattle Ministerial, the representative of Canada recalled her
delegation's approach to clarifying the relationship between the provisions of the multilateral trading
system and trade measures in MEAs.   As stated at previous CTE meetings and the High LevelSymposium on Trade and Environment, Canada believed it would be useful for the WTO to develop a
"principles and criteria" approach to multilateral environmental agreements that would assist WTO
panels in assessing MEA trade measures and international negotiators contemplating the use of trade
measures in an MEA.   Canada had used this "principles and criteria" approach domestically and
found it to be useful in helping structure interdepartmental discussions and develop consistent policy,
bearing in mind that every MEA or regional environmental agreement has a different negotiating
dynamic.
4. The representative explained the "principles and criteria approach" chronologically by
reviewing the criteria that MEA negotiators might us e in determining the need for trade provisions in
environmental agreements.   The criteria suggested by Canada were: (i) That trade measures be
chosen only when effective and when other alternative measures were considered to be ineffective in
achieving the environmental objective or when other measures proved to be ineffective withoutaccompanying trade measures; (ii) that trade measures should not be more trade-restrictive than
necessary to achieve the environmental objective concerned; and (iii) that the trade measures chosen
should not constitute arbitrary or unjustifiable discrimination.
5. With respect to an existing MEA, if there was a WTO challenge (which had not yet happened
and was unlikely to happen in the future), Canada suggested that a WTO panel might consider thefollowing qualifying principles in reviewing the relationship between trade measures in the MEA and
WTO rules: (i) is the MEA open to all countries? (ii) does the MEA reflect broad-based international
support? (iii) are the provisions specifically authorizing trade measures drafted as precisely as
possible? (iv) is trade with non-parties to the MEA permitted on the same basis as with parties when
non-Parties provide environmental protection equivalent to that required by the MEA?WT/CTE/M/21
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(v) have negotiators explicitly considered the criteria developed by the WTO for the use of trade
measures in MEAs?
6. In Canada's view it was useful for the WTO to consider undertaking work to provide guidance
to WTO panels and MEA negotiators on the relationship between trade measures in MEAs and WTO
rules.  This approach did not contemplate ame nding GATT Article XX, but rather, some form of
Ministerial or Interpretative statement.
7. In discussing Item 5, Canada emphasized once again the very different role that dispute
settlement plays in MEAs as opposed to WTO Ag reements.  In Canada's experience, Parties to
existing MEAs, and countries involved in negotiating new MEAs have not placed a great deal of
emphasis on dispute settlement provisions largely because there is no history of them ever being used
and little expectation that this situation will change in the foreseeable future.  On this basis, Canada
continued to support the development of strong and effective compliance regimes in MEAs. Itbelieved a number of elements needed to be considered in developing such regimes.  These included
identifying potential non-compliance, determining non-compliance and its consequences, monitoring
and determining return to compliance and an auto matic review procedure for non-compliance in the
future.  The objective of any compliance regime should be to correct persistent patterns of non-
compliance in a cooperative and facilitative manner.  The scope of a non-compliance procedureneeded to be closely linked to the achievement of the particular environmental objective of each
MEA.
8. As previously stated, Canada believed it was helpful to the work of the CTE for the
Secretariats of MEAs with functioning compliance procedures to keep the CTE informed of their
development and operation, including measures being taken to assist developing countries andeconomies in transition to comply with their obligations.
9. The representative of Norway stated that th e informal morning information session with a
number of MEA secretariats reflected that trade measures were being used or contemplated to be
applied in several MEAs in order to achieve environmental objectives.  The WTO - as the guardian of
the trading system – could not remain unaffected by this development.
10. Norway - in the context of the preparati ons for the 1999 Ministerial Conference – had
submitted a communication to the General Council on trade and environment.  In that communication
(WT/GC/W/176) Norway proposed inter alia  that trade-related instruments pursuant to MEAs be
given specific accommodation in the WTO system.  The aim of negotiations on this subject should be
to clarify existing WTO provisions and elaborate new disciplines.
11. In the comprehensive process of identifying Norwegian positions on the relationship between
MEAs and the WTO rules, Norway outlined a number of principles.  These included, inter alia :
(i) The most effective way of solving global/transboundary environmental problems is through
international cooperation and multilateral rules, especially multilateral environmental agreements.
Such agreements reduce the risk of countries taking measures that have effects on other countries but
without their consent (unilateral/extraterritorial measures). (ii) It is presumed that environmental
policy will continue to be drawn up within the relevant international environmental organizations andat the national level, not in the WTO. (iii) WTO rules and environmental agreements must continue to
be on the same level, without a hierarchical ranking.  The task ahead would then be to ensure that
these two sets of rules are mutually supportive and legally consistent, and that both contribute to
sustainable development.  (iv) Trade measures fo r environmental purposes within the framework of
an environmental agreement may only be taken in cases where the agreement in question includesspecific provisions allowing for such trade measures. (v) It must be ensured that the use of trade-
related instruments in environmental agreements does not constitute a means of arbitrary or
unjustified discrimination or a disguised restriction on international trade vis-à-vis  countries that are
not party to the agreement in question. (vi) If non-pa rties to an MEA fulfil the obligations set out inWT/CTE/M/21
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that environmental agreement, they will not be subjec t to less favourable treatment than parties to the
agreement.  These principles had emerged during consultation with stakeholders in Norway.  They are
put forward as an input to the work on this item in the WTO.
12. The representative of Japan supported the view that multilateral cooperation in the
international community is indispensable to tack le global environmental problems.  A multilateral
approach should also be encouraged to prevent a country from applying a trade-related  measure
without securing understanding from other countries concerned.  This should be facilitated by
identifying the relationship between trade-related measures related to MEAs and the WTO.  Japan
welcomed the Communiqué that had been adopted at the G-8 Ministerial Meeting which shared this
attitude and clearly recognized the importance of this issue.
13. Trade is only one of the many factors causing environmental problems.  Therefore an attempt
to depend on trade measures as the only possible solution to the environmental crisis would lead tounjustifiable discrimination and protectionism disguised as environmental protection.  Japan stressed
the need to maintain a balance between both asp ects in discussing the relationship between trade
measures pertaining to MEAs and the WTO.
14. Based on such an approach, Japan had examined possible options, including the review of
GATT Article XX on several occasions, including at the March High Level Symposium on Trade andEnvironment.  Japan was reflecting upon the views expressed by other Members at the Symposium,
along with the proposals put forward by Canada and Norway.
15. The representative of the European Commun ities stated that discussions at the March
Symposium confirmed the importance of the MEA issue.  The EC remained convinced of the need to
accommodate trade measures taken pursuant to MEAs within the WTO.  The EC felt that MEAs werethe best way of tackling international environmenta l problems and the fact that any trade measures
they may contain were negotiated and agreed in a multilateral context was the most effective
guarantee against protectionist abuse or unjustifiable discrimination.
16. This issue should be approached in a more constructive and less divisive manner than in the
past.  All countries had an interest in addressing global and transboundary environmental problemsthrough strong and effective multilateral agreements.  The Biosafety negotiations in Cartagena
confirmed that because of their relative lack of control and enforcement capabilities, developing
countries were especially vulnerable to some trade-related environmental risks.  The establishment of
effective international instruments to prevent such risks was therefore particularly important for
developing countries.  However, this element had not been sufficiently taken into account in the
CTE's deliberation on the MEA issue.  In fact, there seemed to be a sharp contrast between the
position expressed in the CTE by many developing countries and their stance in multilateralenvironmental negotiations, notably on biosafety and waste.
17. The CTE's discussions on MEAs had had some positive effects.  Now the relationship
between MEAs and WTO rules was more systematically and comprehensively considered in
environmental negotiations.  However, some of the options proposed were inappropriate.  Proposals
were made to introduce new provisions in MEAs (e .g. Biosafety Protocol a nd POPs Convention) – the
so-called "savings clauses" – stating that environmental agreements do not affect the obligations
under existing international agreements.  The EC opposed these proposals, believing them to  be
unnecessary and felt they would weaken the legal effectiveness of MEAs.  Furthermore, they implied
that MEAs would be subordinated to, or isolated from, other international agreements.  The EC
argued that there were other solutions available to clarify the relationship between MEAs and WTOAgreements.  The notion of mutual supportiveness and consistency should be the fundamental guiding
principle in this area.WT/CTE/M/21
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18. At a previous meeting the Community had expressed its appreciation for the revised analysis
of WTO case law on GATT Article XX issued by the Secretariat.  It had made some preliminary
comments on the Appellate Body report in the Shrimp/Turtle case.  The positive evolution reflected in
previous cases had been confirmed in this report.  The EC welcomed the interpretative criteria
developed by the Appellate Body.  In particular: (i) the interpretation given to the exception insubparagraph (g) showed that there was broad scope to justify environmental measures under
GATT Article XX; (ii) the increasing emphasis put on the requirements laid down in the head note to
GATT Article XX resulted in a more logically consistent interpretation of this Article; (iii) the
references made in the Shrimp/Turtle report to seve ral instruments of international environmental law
were encouraging.  It was clearly desirable to avoid WTO Agreements being interpreted as if they
were isolated from other branches of international law.
19. The Appellate Body clearly recognized that it would not be legitimate to enforce trade
restrictions based on the exporting country's regulatory policies, while opening the door for such
restrictions if based on a broader multilateral agreem ent.  Some of the statements found in the report
might be interpreted as implying that it would be possible to adopt measures aimed at ensuring that
the goods that are actually imported comply with requirements, including PPM-related requirements,
unilaterally decided by the importing country (e.g. measures making market access conditional uponcompliance with such requirements by foreign suppliers).  It would be useful to consider this issue
further, taking into account the potential environmental benefits, as well as the potential trade
distorting effects.
20. The representative of India argued that the de bate on MEAs was a non-issue.  Here was one
problem that did not need fixing.  The WTO should focus on more pragmatic issues as they arose.  He
asked the earlier speakers to give one example of an MEA that had been prevented from coming into
being as a result of the WTO.  The presentations  made by several MEAs in the informal morning
session revealed that they were all working effectively without WTO intervention.
21. In response to the EC's earlier remarks, the Indian representative claimed that in the Biosafety
Protocol, developing countries asked for trade measures as part of a trade package and there wasnothing contradictory in that.
22. Article XX allowed for MEAs to take measures necessary for the protection of the
environment.  It was clear that Article XX of the GATT did not need amendment.  The problem lay in
the fact that the Chapeau was used to undermine th e principles of the Article, and that developed
countries used MEAs as a disguise for introducing a protectionist agenda into the WTO.
23. Commenting on the Norwegian proposal, the Indian representative stated it was contradictory
to state that as long as a trade measure was taken in the context of an MEA, it would not amount toarbitrary or unjustifiable discrimination, as it would in the light of the above.  Therefore, there needed
to be a precise definition of an MEA.
24. An accommodation to take into account an MEA really meant a trade measure taken by a
particular country under certain carefully defined circumstances.  As long as this was construed as it
should be as a unilateral action taken by a particular country under certain specifically definedcircumstances, it was difficult to have a blanket rule on the subject.  Therefore the WTO needed to
examine the issue case by case and apply Article XX.  The WTO had already sanctioned MEAs,
therefore there was no need for them to seek  further accommodation within the WTO rules.
25. The representative urged members to clarify what they meant by the term "accommodation."
Did it refer to Article XX or something else? With regard to Article XX, was the concern related tothe principles or the chapeau?  In response to the EC delegate's comments on the WTO ruling in the
Shrimp-Turtle case, the Indian representative said the Appellate Body report had been adopted by a
negative consensus;  there had been no other option.  Developing countries were deeply concernedWT/CTE/M/21
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with the evolutionary theory of interpretation that was applied by the Appellate Body.  It was for the
WTO Members to interpret such cases, but this ha d been done by the Appellate Body in the Shrimp-
Turtle case.
26. He wondered what the debate was really about.  If a majority of members got together and
formed an MEA, was this falling foul of WTO law?   If the answer was no, then the issue needed no
further discussion.  There were other problems that needed to be addressed in the CTE, such as
labelling, which was a market reality being faced by developing countries all the time.  These were
real life issues.  MEAs were a non issue.
27. The representative of Brazil endorsed India's statement.  Article XX did not need to be
amended.  To date no MEAs had been prevented from coming into being because of the WTO, in
spite of the fact that WTO rules were sometimes inconsistent with MEA trade measures.  With
reference to the morning's informal discussion on MEAs such as CITES, trade measures taken bysome countries might have given rise to conflicts between parties, but they never had because they
were all multilaterally agreed upon.  Some policies were against WTO rules through the use of bans
and discrimination, but these were necessary.  One could say that the less the trade relevance of the
species concerned, the greater the consensus, and vice-versa.  These issues were adequately addressed
within the framework of the CITE S Convention.  Therefore there was no need to bring them into the
WTO.
28. In response to the EC's comments on the "savings clause" and MEAs, the Brazilian
representative said it had no relationship to Article XX.  Trade measures to prevent the dumping of
hazardous waste and domestically produced and prohibited products exported from developed
countries to developing countries constituted an important problem.  Certain measures, althoughsometimes inconsistent with WTO rules, had proved  to be very effective in the prevention of such
practices.
29. He added that the WTO tackled concrete cases such as hormones, bananas and aircraft
subsidies and not future, possible, or eventual problems.
30. The representative of Hong Kong, China was willing to reflect with an open mind upon the
views put forward by other delegations on the rela tionship between the WTO and MEAs.  India's view
that this was a false issue had its merits. Perhaps the issue was not really MEAs, but unilateral action,
as proven by the recent disputes brought to the WTO.
31. The inter and intra-relationships among Members of the WTO were clearly defined by the
WTO Agreement.  MEAs should not be a back door for circumventing any of the WTO
commitments.  This should form the basis of  any guiding principles on the issue.  Secondly, one must
not blur the dividing line between the WTO and MEAs.  These were distinct sets of legal agreementsand contractual obligations.  While there might be some overlap between the membership of the
institutions, they were not identical.  They have different objectives and different instruments to
achieve their goals.
32. The representative added that the MFN Principle (GATT Article one) and the one-tier Dispute
Settlement Mechanism formed the cornerstones of the WTO.  Any new measures that would createuncertainty or a double or multilayered Dispute Settlement Mechanism should be avoided.  In this
connection and in response to the Canadian proposal for a "Principles and Criteria" approach, the
representative from Hong Kong, China recalled that the WTO Dispute Settlement Mechanism was
based solely on the WTO Agreements.  It did not seem feasible for a WTO panel to consider
principles and criteria that extended beyond these.  If the issue concerned unjustifiable or arbitrarydiscrimination, then as India pointed out, this was adequately covered by the Chapeau of Article XX.
According to the representative, Canada's proposal did not bring any new value added to theWT/CTE/M/21
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Dispute Settlement proceedings, especially in terms of criteria.  In terms of principles, it was not clear
how the ones outlined by Canada could be applied to the WTO.
33. If Canada and Norway  wished to introduce new sets of rights and obligations into the WTO,
the representative was willing to discuss these, providing they were introduced as such and not
disguised.  At present the proposal was not clear and needed to be more specific about its realintentions.
34. The representative of Korea stated that his delegation was also open minded on these issues.
There was a general consensus that the trade measures pursuant to MEAs created a problem when
countries resorted to unilateral measures.  Even though the WTO could accommodate the trade
measures mandated by the MEAs, there was still a need to eliminate potential areas of conflict.
Further clarification was needed on the scope and conditions under which WTO rules could
accommodate the trade measures used by MEAs, for the following reasons: (i) it would be beneficialto all WTO Members if the WTO more clearly articulated the rules distinguishing legitimate trade
measures specifically mandated by genuine MEAs and unilateral measures to deal with environmental
challenges outside the jurisdiction of the importing state; (ii) in the interest of exporting countries,
notably developing countries that were more susceptible to meeting import restrictions, given the
normal period of dispute settlement, it was important to define clear guidelines to resolve anyconflicts that could arise; (iii) clearer rules in the WTO could enhance the predictability of future
negotiations, thereby reducing the possibility of any conflict arising between WTO agreements and
MEAs.
35. The representative of Switzerland shared the concerns expressed by many other delegations.
The increasing awareness that MEAs have also to take into account trade aspects when pursuing
environmental goals was welcomed.  Furthermore, the use of trade measures within the framework of
MEAs was not only understandable but seemed to be the best way to ensure effective realization of
environmental goals.  Even if trade relevant provisions of MEAs were generally not inconsistent with
WTO rules and principles, this evolution nevertheless created a growing risk of conflict.  Therefore, a
further clarification of the relationship between WTO rules and rules established by MEAs wasnecessary.
36. There were three basic methods to clarify this relationship: (i) the relevant MEAs could adopt
rules for clarification, (ii) the WTO panels and other courts and tribunals could develop such rules (iii)
the WTO Members could adopt a rule for clarification of this relationship within the framework of the
WTO.  Switzerland found only the third option to be acceptable.
37. Firstly, clarification of the relationship within the MEA framework not only bore the risk that
rules would be adopted which were unacceptable from a trade perspective; it was also inefficient, aseach single MEA would have to regulate the relati onship of its rules towards the rules of the WTO.
Secondly, the clarification between WTO and MEAs  was simply too important and too political to
delegate to a "technical" - even if the result of such a delegation might be acceptable.  Moreover, there
was no guarantee that the decisions of the different panels, courts and tribunals would be consistent.
Therefore, in order to enable a clear, transparent and predictable relationship between the WTO andMEAs, this relationship had to be clarified within the framework of the WTO.
38. At this moment, the discussion where to regulate the WTO-MEA relationship within the
framework of the WTO focussed on the following po ssibilities: (i) amend Arti cle XX, (ii) introduce a
"coherence clause", e.g. in form of an "Understanding on the WTO Agreements concerning the
Relationship Between the Provisions of the Multilateral Trading System and Trade Measures Pursuantto Multilateral Environmental Agreements" which could be adopted at a Ministerial Conference.  To
amend Article XX would open a debate and entail the risk that the whole article - which was the
balanced result of long negotiations - would have to be reconsidered.  This was a major disadvantage
of this approach.  Furthermore, it seemed that there was no necessity to change the WTO rules byWT/CTE/M/21
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creating a new exception to the application of WTO rules and principles.  Rather what was needed
was to clarify the relationship between WTO rules and other, eventually conflicting rules and
principles.  Therefore, Switzerland preferred providing guidelines to deal with possible conflicts to
clarify the relationship between WTO rules and principles and MEAs through the adoption of an
interpretative "coherence clause."
39. The representative recalled that problematic conflicts between the WTO and MEAs would
remain the exception:  the WTO and MEAs dealt with  different issues and had different concerns and
goals.  Therefore, the first principle should be that each framework is responsible and competent for
the issues falling within its primary competence.  The WTO should focus its activities on trade-related
issues and not engage in adopting rules specifically aimed at protecting the environment;  on the other
hand, MEAs should concentrate their activities on the protection of the environment.  Hence, most of
the time, the question whether WTO rules or MEA rules govern a specific situation would be resolvedthrough a "center of gravity" approach:  if the question at issue concerned primarily the protection of
the environment, the MEA rules apply;  if it involv ed foremost trade aspects, then WTO rules govern.
40. Switzerland therefore suggested that the prin ciple governing the relationship between the
WTO and MEAs should be the following: (i) WT O rules govern trade-issues, MEA rules apply to
environmental issues, (ii) Environmental measures adopted in an MEA should be considered, from theWTO perspective, as legitimate and necessary; it should not be possible to challenge the legitimacy or
necessity within the WTO framework.  The WTO should, however, be concerned whether such
measures involved an arbitrary discrimination or the possibility of achieving a trade advantage
(hidden protectionism).  If this was the case, then a Member should be able to challenge the measure
in question  within the WTO on these grounds.
41. Finally, it would have to be resolved whether all MEAs should be granted this "immunity
from full scrutiny", i.e whether indeed all environmental trade-measures adopted by any MEA should
be considered to be legitimate and necessary.  It was questionable whether the WTO was the proper
institution to decide which MEAs were to be seen as providing for legitimate and necessary measures
and therefore should not be subject to full WTO scrutiny.  Therefore, the relevant criteria should be anobjective one like the adequate representation in an MEA and its openness to all countries concerned.
42. Switzerland suggested that further discussions on this issue should consider the different
concrete proposals previously made, such as the Swiss Non-Paper of 20 May 1996.  Switzerland was
ready to revisit its proposal and continue the discussion on the relationship between WTO and MEAs
on a informal and formal basis.
43. The representative of Venezuela supported the ongoing cooperation and dialogue between
MEAs and the WTO  because this favoured environmental issues being discussed in an international
context.  There was no need to review the WTO ru les as they gave the flexibility to countries to
implement national measures for the protection of the environment.  Venezuela considered the
mechanism of the DSU to be effective in tackling environmental issues that had come before the
WTO, which should not be tackling environmental concerns as such.
44. Venezuela supported the coordination of MEAs within the WTO and stressed the need to
encourage the transfer of technology to developing countries by increasing the availability of funding.
Environmental NGOs should be listened to at the national level and given a voice in international
symposia and other fora to share their experiences and proposals to protect the environment.
Venezuela did not oppose the view that a country could use an MEA to apply trade measures that are
not directly refered to in the protection of its companies, or the extra-territorial application ofenvironmental laws.
45. The representative of Australia stated that MEAs and the WTO should be able to
constructively co-exist and countries should seek to ensure that they were able to fully comply withWT/CTE/M/21
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the obligations under both sets of agreements.  A great deal still needed to be done to improve policy
coordination.  This process had been enhanced by Information Sessions with MEAs, such as the one
held in the morning.  These and other discussions in the CTE helped facilitate a greater understanding
of the issues and improved information flows between environment and trade officials.  There needed
to be continuing efforts to secure greater coordination and cooperation between officials at thenational level and to ensure that delegations participating in international negotiations were able to
represent well considered government positions.
46. The representative of the United States stated there already existed a  broad scope under WTO
rules for trade measures and other measures that affect trade under MEAs.  During previous
discussions on the relationship between MEAs and the WTO, there had been some occasions where
the WTO had attempted to give guidelines for MEAs to follow.  There had been suggestions to set
criteria which included concepts such as effectiveness.
47. In the Panel report on the US Gasoline case, the argument had been made that Article XX
(g) should be interpreted as requiring a measure to be effective.  The Appellate Body had concluded
that this was wrong as such a requirement could not  be found in the Article.  Also, from a practical
view point, governments and international instituti ons should not try solutions without knowing if
they would resolve the problem at hand.
48. In order to avoid problems with MEAs, some delegates had proposed to negotiate a clear set
of rules of the road aimed at ensuring compliance with WTO principles. The United States
representative cautioned that this might be too simplistic an approach.  The best way to ensure that the
WTO and these agreements operated in harmony was to have more interchanges between WTO and
environmental officials negotiating these agreements.  There were no easy answers or blueprints toresolve these issues.  He supported Hong Kong, China's concern that MEAs should not be used as a
back door to circumvent WTO rules.  This occurred mainly due to a lack of cooperation between trade
and environment officials, as both have a different set of  priorities.
49. The "savings clause" was recognized in the Vienna Convention as a way for parties to an
agreement to clarify their intentions vis-a-vis  other agreements, and had been used in many
agreements such as the Deserts Convention.  These were not new tools to undercut MEAs, but had
emerged from the corpus of international law.  If all parties to a negotiation were clear that no conflict
was intended, they could agree to reflect this in a savings clause.  This was an effective way of
preventing countries from changing their intentions at a later stage of negotiation or implementation.
It could prevent disputes from arising and being brought to the WTO.  The conflicts that had arisen
during the negotiation of the Biosafety Protocol clearly highlighted the need for a savings clause to
clarify the basic parameters.
50. Commenting on the Secretariat document WT/CTE/W/117 on the draft Protocol on Biosafety,
the United States noted the attempt to differentiate trade  articles from non-trade articles.  Given the
potential trade impact of the Protocol, he requested the Secretariat to circulate the entire text.
51. The representative of Costa Rica supported the views articulated by India, Brazil and
Venezuela that a harmonious relationship between the WTO rules and MEAs already existed.
Environmental problems needed to be resolved through MEAs and not the WTO.  There was no need
to introduce any amendments to Article XX, as it was sufficiently broad to contemplate a number of
trade measures that could be taken to protect the environment.  None of the environmental cases
studied by Panels in the WTO had dealt with trade measures negotiated in MEAs, but rather unilateral
measures.  These were concrete issues that should be discussed, as opposed to hypothetical cases thatmight arise in the future.
52. The representative of Egypt failed to see the need for more legal clarity on the relationship
between WTO rules and trade measures, taken pursuant to multilateral environmental agreementsWT/CTE/M/21
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(MEAs).  GATT Article XX was the legally-binding provision that captured the practical relationship
between trade and environmental policies, and he saw no need to go beyond existing WTO provisions
to accommodate trade measures taken pursuant to MEAs.  There was considerable scope for WTO
Members to use trade measures for environmental pu rposes consistent with WTO rules, including the
defined scope of Article XX.  On the other hand, it was very unlikely that parties to an MEA wouldchallenge trade measures taken pursuant to it as that would undermine the obligation they had
accepted in that framework.  Up to this moment there had been no GATT or WTO dispute concerning
trade measures applied pursuant to an MEA.  Egyp t strongly cautioned against any attempt to modify
or re-draft Article XX.  As it stood, it addressed a wide range of environmental concerns, like the
conservation of natural resources, protection of living organisms, and the protection of global
commons like the ozone layer.
53. Furthermore, proposed modifications would undoubtedly introduce elements of controversy
that would have the potential of mistrust leading to weakening the multilateral trading system and to
have it assume functions for which it had not been created, nor for which it had a mandate.  In
addition, the WTO did not have the in-house technical expertise in this field that would enable it to
discharge its duties appropriately.
54. The representative of  the European Communitie s said he was willing to listen to other
Members and try and accommodate their requests.  However, he was disappointed to see such
opposition to issues that were of major concern for the EC.  The representative challenged the view
that the WTO only dealt with real issues and problems and said it did much more.  Hence WTO was
now in place of the old GATT, to promote coopera tive policy-making in the field of international
economic relations.  This went beyond the borders of market access negotiations, but was real as well.Clarification on MEAs would be a safeguard against unilateralism and he appealed not to look for
ulterior motives and a cover for protectionism.
55. The representative of New Zealand  recalled that his delegation had put forward its position
on item one and five in several CTE meetings before.  New Zealand stressed that prevention was
better than cure.  This referred to the preventi on of any inconsistencies developing between the work
done in the MEA bodies vis-a-vis   the WTO rules.  There was a need for the principle of coherence to
guide activities in the MEA bodies and the WTO.  Various devices such as the savings clause were
effective tools to help achieve this objective by creating clarity.  Furthermore, there needed to be a
clear set of rules on compliance and dispute settlement mechanisms to act as a disincentive to
misinterpreting the rules or interpreting them very loosely and creating conflicts that could be
avoided.
56. The representative of Chile said she was open to the views put forward by Canada and
Norway.  There was a need for consistency and coherence between the different actors in this field
and especially better coordination with countries that lack sufficient resources.
57. The representative of Hong Kong, China cautioned against the use of the coherence principle
in the context of the WTO and MEAs, suggesting that this could lead to the inclusion of other
contentious issues such as labour standards.
58. The representative of Norway said that discussions on MEAs in the WTO were complicated,
at times giving rise to misunderstandings.  In response to the potential areas of conflict highlighted by
some Members, Norway felt that a conflict would inevitably arise unless there was further
clarification of trade measures pursuant to MEAs.  Therefore, Norway suggested that inter alia  the
head note of  Article XX should apply to trade measures taken pursuant to MEAs.  It was sceptical ofthe views advocated by some Members that the WTO should only be concerned with specific cases.
Strengthening WTO disciplines to achieve greater legal clarity should be one of its major tasks ahead.WT/CTE/M/21
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59. The representative of Morocco said  that it was time to implement the mandate from the
Marrakesh agreement.  In the framework of negotiations, a mutually agreeable solution had to be
found to the MEAs: how can measures taken in relation to MEAs be compatible with WTO rules?
Several proposals were suggested in past CTE meetings, including the possibility of notifying the
WTO of all environmental agreements.  But in order to find a real solution, there must be clearlydefined criteria that take into account the interest of all parties.
60. There were measures in MEAs that were adopted by consensus and ratified by all parties such
as the Basel Convention.  Some Members in the WTO found these measures to be restrictive, such as
one provision that provided for waste, which was considered to be discriminatory.  Others saw this as
a positive step as it contributed towards sustainable development. In this light, a global approach was
needed to resolve these issues.  Certain provisions in MEAs such as CITES used quotas to penalize
countries, by limiting export quotas of ivory.  Strategies to compensate these countries needed to bedeveloped, along with technical assistance to help them conform to the standards set by MEAs such as
the Montreal Protocol.  This could only be achieved through a global and balanced approach, taking
into account the needs and priorities of developed and developing countries.
61. The representative of Mexico emphasized that the WTO was a trade organization.  In some
cases, measures were imposed under the pretext of protecting the environment, when in fact they were
MEA trade measures.  The WTO rulings in these cases dealt with the trade aspects of these measures.
None of the proposals advocated earlier seemed to be sufficiently practical to address the issues at
hand.  Given the limited mandate of the CTE, the representative proposed to continue further
deliberations until an optimal solution was reached.
62. The representative of Canada stated that the WTO should be a proactive organization that
fostered a legal environment based on rules and predictability.  The criteria and principles approach
put forward by Canada should be seen in this light.  It was essential to integrate trade and environment
policy formulation and to foster coordination betw een domestic trade and environment ministries to
meet the challenges imposed by the cross-cutting nature of these issues.  While the CTE had played a
useful role in nurturing an understanding of environmental concerns in trade officials, relatively fewofficials from environment ministries attended CTE meetings.  The lack of understanding between
trade and environment officials often lead to conflicts in the context of MEAs, as pointed out earlier
in the case of the Basel Convention and the Biosafety Protocol.  Canada had contributed to the March
High Level Symposium through sponsoring delegations from developing countries.
63. The representative of Guatemala felt that MEAs were important to achieving certain specific
goals in order to protect the environment.  It was up to parties to an MEA to determine whether or not
the trade measures applied in that context were valid.  Different institutions were set up to ensure thatthe MEAs were enforced.  They should not be seen as a whole, but be distinguished and differentiated
by their specific goal.  Coordination was needed between officials working on trade and those on
environment.  Guatemala endorsed the need for further discussions to resolve these complex sets of
issues.
64. The Chairman concluded the discussion on the relationship between MEAs and the WTO as
being a rather complicated debate, with Members holding different positions.  Already, a certain
element of a small common denominator was emerging.  Efforts were needed to co-exist
constructively with the MEAs and the information se ssion held prior to the meeting had been a useful
exercise in this direction.  Better coordination between officials in charge of trade and environmental
policies at the national level was imperative.  Constructive efforts were needed to meet the challengeof  harmonizing the differing views in future discussions.WT/CTE/M/21
Page 11
Item 7 The issue of the export of domestically prohibited goods
65. The representative of Morocco referred to the notifications on domestically prohibited goods
which had been operational from 1983 until 1990, when it appeared to have been suspended.  Under
the provisions of the Agreement in 1984 which had called for transparency, Morocco requested theSecretariat to reactivate the process of  receiving notifications.  This would provide useful information
on the laws and domestic regulations that govern the production and trade in products and goods and
would reveal whether products were subjected to certain prohibitions,  for example pharmaceutical
products that were out of date, fertilizers, and dangerous chemicals used to make toys or radioactive
substances.  This would complement the overall transparency, which all the Members had chosen to
ensure since the Marrakesh Agreement.  It would also enable developing countries to prepare
legislation  and domestic regulations and strengthen human and institutional capacity.
66. The representative of the United States claimed that the notification process had never been
terminated.
67. The representative of Morocco noted that although the contracting parties had never
terminated the process, it had come to an end naturally and that there were no notifications received
since 1990.  Given the importance of the issue, contracting parties should again be asked to notifytheir exports of domestically prohibited products.
68. The representative of Egypt supported Morocco, emphasizing the need for countries to notify
the WTO about their national measures relating to DPGs, especially with reference to pharmaceuticals
and hazardous waste.
69. The representative of Uruguay questioned the need for a separate notifications for DPGs,
given the existing provisions for notifications under the SPS and TBT agreements.  If legislation was
enacted at the national level prohibiting hazardous wastes or chemical products, this should be
notified and this could require a special format.
70. The representative of Morocco said that in the framework of the TBT and SPS, the criteria
were established by the agreements.  DPGs concerned products that were prohibited at the national
level or regulated for reasons concerning health and safety.  It was important to examine domestic
legislation and make provisions to notify the WTO about harmful products which were prohibited.
71. The Chairman was grateful to the representati ve of Morocco for recalling the notification
requirement, which was an important issue.  Members were reminded of their obligations to provide
regular information on their national policies relating to DPGs, through the notifications.
Item 8 The relevant provisions of the Agreement on Trade-Related Aspects of Intellectual Property
Rights
72. The representative of Malaysia, on behalf of ASEAN, commented on the relationship
between intellectual property rights and biodiversity conservation, discussed in previous meetings of
the CTE.  The representative urged the Secretariat on behalf of ASEAN to prepare a paper that would
examine the synergies between the CBD and TRIPS Agreement.  Acknowledging the two papersalready done by the Secretariat on the legalistic aspects, the representative stressed the need to
examine the synergies between the two agreements, with case studies focussing on the sui generis
option of Article 27.3(b) of the TRIPS Agreement.  The paper should explore the ways in which
countries could implement the sui generis  system:  through UPOV and other alternatives.  This would
provide very useful information to developing countries and other members of the WTO.WT/CTE/M/21
Page 12
73. The representative of the United States stated that factual papers prepared by the Secretariat
had been very instructive.  However, he was wary of the Secretariat writing a paper about synergies
between the two Agreements and asked for clarification from the representative of Malaysia.
74. The representative of the European Communities supported Malaysia's request for a paper
and said that it had consistently seen some potential synergies that needed to be developed between
the CBD and TRIPS agreement.  This had recently b een drawn to the attention of the EC's Council of
Ministers, who asked the EC delegation to move fo rward in this area.  Therefore, the EC welcomed
any support the Secretariat could provide by means of a paper.
75. The representative of Malaysia, on behalf of ASEAN requested the Secretariat to prepare an
objective and factual paper based on case studies from empirical evidence.  The paper should focus on
the sui generis  system and whether there is only one method, as suggested by UPOV, or whether there
are other means  of implementation.
76. The representative of Guatemala supported Malaysia's request for a paper and urged the
Secretariat to provide a translated copy in Spanish as soon as possible, to enable it to be ready for an
informed discussion on the subject in October.
77. The Chairman concluded that the Secretariat would prepare a factual paper on the relationship
between the CBD and the TRIPS Agreement, in particular Article 27.3(b).  This study should be
prepared before the next CTE meeting in October.
Other Items
Item 3b  The relationship between the provisions of the multilateral trading system and the
requirements for environmental purposes relating to products including standards and
technical regulations, packaging, labelling and recycling.
78. The Chairman introduced document WT/CTE/W/114 prepared by the International
Organization for Standardization (ISO) to provide an update on its work on international standards for
environmental labelling, in response to a request by the EC at the last CTE meeting.
79. The representative of the European Communities welcomed the ISO paper and the fact that
ISO 14024 had moved forward in ISO by applying a lifecycle approach to eco-labelling schemes, an
aim that one tried to achieve within the Community.  Labelling was one of the three priorities the EC
had highlighted in its agenda for the Seattle Ministerial in a paper submitted to the CTE. He wondered
if the standards under 14024 offered clear and non discriminatory process rules
80. The representative of the ISO stated that the document reproduced the agreed definition of
ISO Type I environmental labelling programmes, often referred to as Eco-labelling programmes, and
provided some background information concerning the content and use of ISO 14024:1999 –
Environmental Labels and Declarations – Environmental Labelling – Principles and Procedures .
Under these programmes, manufacturers were licensed to use a mark, owned by an independent body,
on their products, to demonstrate that these products were environmentally preferable.  Furthermore,
the document provided the definition of ISO Type II - Environmental Labels and Declarations –Self-
Declared Environmental Claims .  This definition was under final verification of consensus and should
be confirmed at the closing of the ballot on 27 July 1999.  According to ISO discussions during therecent series of meetings of ISO/TC 207 Environmental Management , held in Seoul, Korea from
31 May to 6 June 1999, this definition was expected to be adopted and had generated considerable
interest.  About 500 delegates from 54 countries had attended the Seoul meeting, half of them from
developing countries.  The standardization work on ISO/TC 207 was generally progressing well, even
if there was not yet a consensus emerging from the definition of ISO Type III Environmental
Labelling: Labels and Declarations .  He added that among the resolutions of interest to the CTE wasWT/CTE/M/21
Page 13
Resolution ISO/TC 207 23/1999 concerning the pa rticipation of developing countries.  The
Chairperson of ISO/TC 207 was requested to ensure that members not having the possibility of
participating in the various meetings were consulted so that they could provide written comments with
justification/explanation to be reported at the appropriate time.
81. As far as cooperation with developing countries was concerned, since the beginning of the
year, ISO had organized seven regional workshops (t wo in Africa;  one in the Middle East;  one in
Asia, in cooperation with WTO and ITC;  one in Latin America and two in the Baltic countries).  Last
but not least, the Seoul meeting established that the main elements of compatibility between
ISO 14001 and ISO 9001 had been achieved.
Item 4 The provisions of the multilateral trading sy stem with respect to the transparency of trade
measures used for environmental purposes and environmental measures and requirements
which have significant trade effects  
82. The Chairman recalled the Secretariat's document WT/CTE/W/118 on the environmental
database.  All notifications that were environmentally related or included environmental references
had been listed. As the document was only recently distributed, Members might need more time and
could comment at a later stage.
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
83. The Chairman introduced two papers prepared by New Zealand (WT/CTE/W/121) and
Iceland (WT/CTE/W/111) examining the benefits of eliminating trade distorting and environmentally-
damaging subsidies in the fisheries sector.
84. The representative of New Zealand highlighted the main points of his delegations's paper:
stating that world fisheries continued to face a significant crisis as a result of overfishing.  The
immediate cause of this situation was fishing far in excess of what the resource could sustain.  The
underlying factors were a combination of excess capacity and government transfers, which
encouraged excessive investment and effort, toge ther with the absence of effective management
regimes.  This could not be seen as simply an environment problem: it had several dimensions.  With
developing countries accounting for over half of world trade in fish and fish products, subsidies in this
sector also had an impact on development and trade.  Accordingly, this was an issue to be addressed
by the WTO.
85. New Zealand's paper stressed that the FAO had estimated that some 30 to 40 per cent of
current global fishing capacity was a threat to the sustainability of fish resources.  Unless urgent
action was taken, further fish stocks would collapse, and the viability of fishing industries and thecommunities they support would be further threatened.  For these reasons, New Zealand urged
Members to reflect further on this issue, in the CTE and in the Ministerial Conference in Seattle.
86. The sheer scale of the subsidies invested into fishing industries was immense and explained
why pressures on fish stocks had become so acute.  A recent World Bank study estimated that a total
of US$14-20 billion of subsidies were granted each year to the fisheries sector, with at least half ofthat amount provided by OECD countries alone.
1  These subsidies represented 20-25 per cent of
fisheries revenues.
87. New Zealand's objective in raising this issue was not to call into question subsidies that could
be shown to be "good" for environment, or neutral for trade.  Reference was made to a recent
                                                     
1Earlier studies by the FAO concluded that subsidy levels were probably higher than this.WT/CTE/M/21
Page 14
World Bank analysis that indicated environmental subsidies accounted for almost five per cent of all
subsidies provided world-wide in this sector.  These subsidies aside, the pressing challenge was to
address the subsidies that were making a clear contribution to exacerbating the over-capacity problem,
with all of their adverse consequences in th e area of trade, environment, and development.
88. The fact that fish was a heavily traded commodity  meant that the nature and scale of subsidies
in this sector presented a number of important issues for the multilateral trading system, given the
significant trade distortive effects arising from fish subsidies.  Of the annual value of the fisheries
trade (US$50 billion), developing countries accounted for half of this trade, and in 1996 had derived a
net surplus in the order of US$17 billion.  Subsidized  fishing by wealthier nations limited the ability
of developing countries to develop their own sustai nable fishing industries with the benefit of full
access to markets and true market prices.
89. The issue of subsidies in the fisheries sector had been the subject of growing concern and
attention in relevant multilateral and regional fora in recent years.  As the minutes of the CTE
meetings showed, the issue had been considered in some detail by the Committee in 1997.  In 1998
the Secretariat had produced, at the Committee's request, a detailed paper which described relevant
WTO rules and offered an overview of fishing industry subsidies notified under Article 25 of the
SCM Agreement.
90. Fish subsidies and their impact on trade, development and the environment had been
highlighted at the High Level Symposia on Trade and Environment and Trade and Development held
in March 1999.  New Zealand, along with Australia, the Philippines, Iceland and the U.S., were
among a group of countries that had issued a joint statement calling for the elimination of
environmentally-damaging and trade-distorting subsidization of the fisheries sector.  This call hadbeen endorsed by other governments and non-governmental organizations alike in the course of the
two meetings.
91. The problem of overfishing attracted close scrutiny in a range of other international fora,
including the FAO, CSD, OECD, UNEP, UNCTAD and APEC.  In this regard, New Zealand looked
forward to a briefing by the FAO on the important work it had carried out in recent months,culminating with the adoption of an International Pl an of Action for Management of Fishing Capacity.
This plan provided an agreed framework for measures at national, regional and multilateral levels to
balance fishing capacity with resource sustainability objectives.  Its part III set out implementation
provisions.  They included:  development of national plans to manage and, if necessary, reduce
fishing capacity to balance capacity with resources available on a sustainable basis;  progressive
elimination of all factors, including subsidies and economic incentives which contribute, directly or
indirectly, to the build-up of excessive fishing capacity;  participation in international agreementswhich relate to the management of fishing capacity, particularly the FAO Compliance Agreement
2
and the UN Fish Stocks Agreement3.
92. Given the trade, development and environment impacts of fish subsidies, there was ample
scope for the WTO to play a constructive role in addressing this issue and complement the work
undertaken in FAO and other bodies.  The value of fisheries trade, the scale of the trade-distortinginterventions in this sector and their impact on the global environment made this an appropriate
subject for scrutiny by the CTE, as well as by other appropriate bodies of the WTO system.
                                                     
2Agreement to Promote Compliance with International Conservation and Management Measures by
Fishing Vessels on the High Seas.
3Agreement for the Implementation of the Provisions of the United Nations Convention on the Law of
the Sea relating to the Conservation and Management of Straddling Fish Stocks and Highly Migratory FishStocks.WT/CTE/M/21
Page 15
93. The WTO could not supplant the work carried out by various international and regional
bodies that had a specific mandate to address fisheries conservation and sustainable management.
However, the WTO, in cooperation with the expertise that might be provided by other relevant bodies,
was  the appropriate forum for addressing trade-distortive measures that had also been shown to have
adverse environmental effects.  New Zealand suggest ed that recommendations for further work in the
WTO subsidies could include the following: (i) The CTE could invite the FAO to provide information
on the implementation of the FAO Plan of Action and any other actions taken to address the problem
of overcapacity in the fisheries sector.  The FAO had been tasked under the Plan of Action to prepare
information in this regard.  Members could also directly provide information to the Committee on the
specific steps they were taking in this regard; (ii) Further analysis and study of the implementation of
existing WTO disciplines as they apply to subsidies affecting the fish sector could be undertaken.
Questions had been raised on transparency and adequacy of notifications under Article 25 of theSCM Agreement.  Members could consider the extent to which these obligations were being met and
whether they were sufficient to ensure transparent reporting of fish subsidies that are contributing to
the overcapacity and overfishing problem. (iii) Consideration should also be given more broadly to
the adequacy of existing WTO disciplines. This work should be aimed at determining if current
provisions were effectively implemented by Members and whether they required supplementation inorder to secure progressive reduction and elimination of fish subsidies that contributed to
overcapacity.
94. The observer from the  FAO addressed the spreading phenomenon of excessive fishing inputs
and over-capitalization in world fisheries.  The issue was essentially one of having too many vessels
or excessive harvesting power in a growing number of fisheries.  The existence of excessive fishingcapacity was largely responsible for the degradation of fishery resources, for the dissipation of food
production potential and for significant economic waste.  This had manifested itself in the form of
redundant fishing inputs and the overfishing of most valued fish stocks.  The globalization of the
phenomenon had been illustrated by the relative stagnation of world marine catches of major species
since the late 1980s.  Evidence provided by FAO indicated that, in reference to all major marinefisheries, 35 per cent had been subjected to severe overfishing, 25 per cent were fully exploited and
40 per cent still offered scope for development.  Demersal and other most valued stocks had been
most affected.
95. The origin of excess fishing capacity dated back to the widespread tendency of
overinvestment and overfishing under open-access conditions.  Over-capitalization in world fisheries
also came about progressively as a result of broader and related factors, such as: (i) The resilient
profitability of fishing activities whereby technical progress and relative price inelasticity largelycompensated for diminishing yields in overfished fish eries; (ii) the effect of the extension of maritime
areas under national jurisdiction on private and public investment strategies and of related
'nationalization' policies, generally accompanied by sizable subsidization programmes; (iii) the
relative mobility of harvesting capacity, which allowed for a pervasive spill-over of excess capital
among fisheries, both within areas under national ju risdiction and on the high seas; (iv) the changing
nature of the industry, which had grown increasingly competitive and capital-intensive, with markets
that were now largely based on internationally traded commodities;  and above all; (v) the failure of
fisheries management in general, and of commonly used management methods in particular, such as
total allowable catch (TAC) and other methods aimed at regulating the catch rather than the
harvesting capacity itself.
96. In 1997, the FAO Committee on Fisheries (COFI) had recommended that a technical
consultation be organized by FAO to clarify issues related to excess fishing capacity and to prepare
guidelines.  Work undertaken by FAO on this basis
2 had led to the preparation of the FAO
                                                     
2The following reports provide additional information:
Report of the Technical Working Group on the Management of Fishing Capacity.  La Jolla, U.S.A.,
15-18 April 1998.  FAO Fisheries Report No. 586.WT/CTE/M/21
Page 16
International Plan of Action for the Management of Fishing Capacity, adopted by COFI in February
1999.  It had been further discussed by the FAO Ministerial Meeting on Fisheries in March 1999,
which had declared to " attach high priority to the implementation of the International Plan of Action
for the Management of Fishing Capacity … and on putting into place within the framework of
national plans, measures to achieve a balance between harvesting capacity and available fisheriesresources. "
3 The International Plan of Action (IPA) was elaborated within the framework of the Code
of Conduct for Responsible Fisheries, as an element of fisheries conservation and sustainable
management.
97. The immediate objective of the IPA was for "States and regional fishery organizations, in the
framework of their respective competencies and consistent with international law, to achieve world-
wide preferably by 2003 but no later than 2005, an efficient, equitable and transparent management of
fishing capacity."  The IPA further specified that inter alia, States and regional fishery organizations,
when confronted with an overcapacity problem which undermined the achievement of long-term
sustainability outcomes, should endeavour to limit initially at existing levels and progressively reduce
the fishing capacity applied to affected fisheries.  On the other hand, where long-term sustainability
outcomes were being achieved, it urged States and re gional fishery organizations to exercise caution.
98. The IPA was voluntary and based on a number of major principles of the Code of Conduct as
well as on complementary principles, such as:  a three-phase implementation:  (i)  assessment and
diagnosis;  (ii)  adoption of preliminary management measures; (iii)  a system of periodic reviews and
adjustments, with priority being given to managing fishing capacity first where it results in
unequivocal overfishing.  The IPA specified a number of actions to be taken urgently.  Major actions
were outlined below in reference to the main section of the document:  assessment and monitoring offishing capacity, the preparation and implementation of  national plans, international consideration and
immediate actions for major international fisheries requiring urgent attention.
99. Regarding the assessment and monitoring of fishing capacity, the IPA recommended,
inter alia , that States: (i) supported coordinated effort and research to understand better the
fundamental issues related to the measurement and monitoring of fishing capacity; (ii) proceededwithin the next two years with preliminary assessment of fishing capacity and with the systematic
identification of fisheries requiring urgent attention at national, regional and, in collaboration with
FAO, at global level;  and (iii) developed appropriate records of fishing vessels and supported the
establishment by FAO of an international record of vessels operating in the high seas.
100. Concerning the preparation and implementation of national plans, the IPA recommended,
inter alia , that States: (i) developed and implemented within two years a national plan of action to
manage fishing capacity, accounting for the effect of different management systems on fishingcapacity, and, if required, for the need to reduce capacity in some fisheries; (ii) regularly assessed
capacity and any imbalance with available fisheries resources and management objectives;
(iii) adapted such a plan of action regularly on the basis of periodic assessment and for increased
effectiveness; (iv) made regular assessments in developing such a plan, considering the possible
impact of all factors contributing to overcapacity on the sustainable management of their fisheries;(v) reduced and progressively eliminated all factors, including subsidies and economic incentives,
contributing directly or indirectly to the build-up of excessive capacity; (vi) cooperated through
regional fisheries organizations with a view to ensuring the effective management of fishing capacity;
                                                                                                                                                                    
Report of the consultation on the Management of Fishing Capacity, Shark Fisheries and Incidental
Catch of Seabirds in Longline Fisheries, Rome 26-30 October, 1998.  FAO Fisheries Report No. 593.
3The Rome Declaration on the Implementation of the Code of Conduct for Responsible Fisheries.
Adopted by the FAO Ministerial Meeting on Fisheries;  Rome, 10-11 March 1999.WT/CTE/M/21
Page 17
and (vii) collaborated through FAO and other international arrangements in research, training and the
production of documentation and tools to promote effective management of fishing capacity.
101. Taking account of international considerations, the IPA recommended, inter alia , that States:
considered participating in international agreemen ts which related to the management of fishing
capacity, and in particular the FAO Compliance Agreement and the 1995 UN Fish Stocks Agreement;took steps to manage the fishing capacity of their vessels involved in high seas fisheries and
cooperated as appropriate with other States in reducing the fishing capacity applied to overfished
fisheries; recognized the need to deal with the problem of those States which did not fulfil their
responsibilities under international law as flag States with respect to their fishing vessels, and in
particular those which did not exercise effectively their jurisdiction and control over vessels which
operated in a manner that contravened or undermined international law and international conservation
and management measures; supported multilateral cooperation to ensure that these flag Statescontributed to regional efforts to manage fishing cap acity; ensured that no transfer of capacity to the
jurisdiction of another State be carried out without the express consent and formal authorization of
that State;  and avoided approving the transfer of vessels carrying their flag to high seas areas where
such transfers were inconsistent with responsible fishing under the Code of Conduct.
102. Concerning major international fisheries requiring urgent attention, the IPA called for States
to take immediate steps to address the management of fishing capacity applied to these fisheries, with
priority being given to transboundary, straddling and highly migratory stocks that were significantly
overfished.  It urged States to act individually or multilaterally to reduce substantially the fleet
capacity applied to these resources as part of management strategies to restore overfished stocks to
sustainable levels.  The IPA also called for appropriate support to be provided to developing countrieson issues related to the management of their fishing capacity.  It further urged FAO to provide
technical support for a range of activities identified as essential for the implementation of this
instrument.
103. Steps were being taken by FAO to provide support to the implementation of the IPA.  A
technical consultation would be organized from 29 November to 3 December 1999 in Mexico toaddress issues pertaining to the measurement of fishing capacity.  Technical guidelines for the
management of fishing capacity was being finalized.  FAO had also initiated work on the
identification of factors contributing to overcapacity, such as: lack of input and output control,
unsustainable fishery management, and subsidies which had contributed to overcapacity.  FAO aimed
at providing increased direct support to developing member States for the promotion of sustainable
fisheries in general and for the implementation of the IPA in particular.  A programme was being
developed towards this end which included the Forum for Sustainable Fisheries – a multi-donor
initiative being elaborated jointly by FAO and the World Bank.  Finally, FAO had endeavoured to
improve its monitoring of fishing fleets, in general and in the context of its new Global Information
System on Fisheries (FIGIS).
104. The representative of Iceland thanked New Zealand for its submission on the benefits of
eliminating trade-distorting and environmentally-d amaging subsidies in the fisheries sector.  He
referred to the link the paper made with sustainable development and the situation of the developing
countries.  It was important to reiterate the fact that fisheries subsidies were practiced primarily in the
industrialized countries and that the negative trade-distorting effects of these subsidies affected first
and foremost the fish-exporting developed countries.  Thus the removal of these subsidies would
benefit the developing countries most and their prospects for sustainable development.  Icelandappreciated New Zealand's efforts to highlight the FAO's International Plan of Action for
Management of Fishing Capacity and the FAO Code of Conduct for Responsible Fisheries.  Any
work the WTO carried out in the area of fisheries subsidies should be in cooperation with FAO.
Iceland welcomed the submission's recommendation on a work programme to assist in advancing the
Committee's work on fisheries subsidies.  It was clear that the issue of removing fisheries subsidiesWT/CTE/M/21
Page 18
was a strong candidate in building the WTO "win-w in" strategy with respect to trade, environment
and sustainable development.  Iceland was will ing to explore such a work programme further.
105. At the last meeting of the CTE, Iceland had presented a paper addressing the relationship
between sustainable fisheries management and fisheries subsidies (WT/CTE/W/103 with Corr.1.).
Using the experience of Iceland as an example, the paper argued that economic efficiency was aprerequisite of sustainable fisheries.  Given that fisheries subsidies were a primary cause of fisheries
overcapacity, their removal would be the single most important global action in favour of sustainable
fisheries.  The paper aroused a number of valid questions concerning the relationship between
subsidies and fisheries management.  To further illustrate this relationship, Iceland presented another
paper to the CTE (WT/CTE/W/111).  This paper demonstrated why and how
 fisheries subsidies had
led to increased fishing efforts and to the depletion of fish stocks, especially in common propertyfisheries.
106. The issue of fisheries subsidies was of direct relevance to the WTO.  Not only did such
subsidies promote overfishing;  they also distorted trade and impeded sustainable development.  The
committee had sought to address in a meaningful  manner the nexus between trade and environment,
consistent with the call of Agenda 21 for action to promote sustainable development through trade and
to make trade and environment mutually supportive.  Iceland intended to submit a proposal to theSpecial Session of the General Council of the WTO for the preparatory process for the 1999
Ministerial Conference.  The proposal stated: "That as part of the upcoming WTO negotiations,
Members agree to eliminate subsidies that contribute to fisheries overcapacity, in view of the fact that
they distort trade, seriously undermine sustainable utilization of fish stocks and hamper sustainable
development."
107. The representative of Peru supported the proposals made by Iceland and New Zealand to
promote sustainable development through the elimination of fisheries subsidies.  The subsidies
imposed by developed countries on their fisheries distorted trade and gave them an unfair trading
advantage.  This had undermined the trading potential of developing countries, some of whose
populations relied heavily on their fisheries sector for subsistence.  Efforts had been taken bycountries such as Peru to ensure that these resources were being utilized more sustainably, without the
use of subsidies.  She said the preservation of the environment should be a responsibility shared by all
countries on an equal footing.  Countries that had shown particular concern for the environment
should show leadership by eliminating subsidies that contributed to overcapacity in fisheries.
108. The representative of the Philippines supported New Zealand's initiative.  She said the
problem associated with these forms of subsidies was one of inter-linkage between trade and
sustainable development, of which environment was an important element.  Subsidies promoted theoperation of distant water fleets fishing off the coasts of developing countries, offering unfair and
economically inefficient competition with local fishermen.  A World Bank study had estimated the
amount of fishery subsidies to be between US$14-20 billion, representing 20-25 per cent of
commercial revenues in fishing industry.  She said this figure in fact represented a conservative
estimate and might not have captured other potentially significant government subsidies.Nonetheless, even such magnitude and scale of fishery subsidies gave cause for alarm on their trade-
distorting consequences and harmful effects to sustainable fisheries.
109. The representative said the WTO could, within its mandate, contribute significantly in
addressing the issues of fisheries subsidies.  This objective should begin with the examination of
present relevant WTO provisions including the SCM Agreement, on which New Zealand's twinapproach could be pursued:  the first being to assess the transparency aspects of fish subsidies.  In this
regard, Members could probably ask the Secretariat to compile the notifications concerning such
subsidies, in order to evaluate whether or not they provided adequate transparency.  The second
approach would be to look into how notified fish subsidies fared against the SCM Agreement,WT/CTE/M/21
Page 19
particularly in respect of the disciplines on prohibited, actionable and non-actionable disciplines.  She
hoped that the CTE would endorse the proposal by New Zealand.
110. The representative of the United States referred to a recent FAO report that revealed that
69 per cent of the world's fish stocks was in a dire condition and said there were too many boats
chasing too few fish.  The increased capacity was an unfortunate by-product of governmentprogrammes intended to bolster this sector but had resulted in unintended consequences of
diminishing its viability.  It was estimated that US$14 to US$20 billion had been granted to the
fisheries sector world-wide, and only five per cent of this amount had been for environmentally
beneficial subsidies.  In short, these programmes had essentially subsidized unsustainability.
111. The subsidies that had led to overcapacity in the fisheries sector had been highly trade
distortive;  they led to overproduction, encouraged  inefficient producers to remain in the market,
shifted the burden of adjustment in overcapacity situations to foreign suppliers and made it difficultfor developing countries to take full economic advantage of the fish in their Exclusive Economic
Zones (EEZ).  In fact these subsidies had been a "lose-lose-lose" proposition, since they represented a
losing proposition for trade, environment, and particularly for development.
112. The United States had been working in several international fora to address this issue, and
commended the FAO and the OECD for the valuable wo rk they had done in this area, in particular,
the FAO Committee on Fisheries for adopting the International Plan of Action.  The United States
representative urged the WTO to address the problem of overcapacity in the fisheries sector because it
was a trade and development problem as well as an environmental concern.  At the same time, she
recognized that the solution to this problem must not be over-broad – it must focus on those subsidies
that contributed to overcapacity.  In addition, she recognized that there were government subsidyprogrammes that had beneficial effects in addressing capacity, which needed to be considered in
further deliberations on fisheries.
113. The representative of Norway said a lot of work had already been done in the CTE on
subsidies in the fisheries sector in the form of submissions.  He shared the view that the CTE should
look more closely on subsidization as one cause of excess fishing capacity.  However, to solve theproblem of excess capacity and unsustainable use of fish stocks and the protection of the marine
environment, a broader approach was necessary.  An example of such an approach was FAO's
International Plan of Action for the Management of Fishing Capacity.  This plan was aimed at
ensuring that levels of fishing efforts were commensurate with sustainable use of fishery resources.
114. Norwegian authorities saw the management of fishing capacity as an important element of the
overall resource management in the fisheries sector.  Norway had taken an active part in the work on
the FAO Plan of Action.  The representative considered it useful that the WTO made its contributiontowards realization of the objectives of the FAO Plan of Action within its sphere of competence.
Environmentally-damaging subsidies falling under the SCM agreement were particularly relevant in
this respect.  He requested that WTO Members be kept informed of the implementation of the FAO
Plan of Action to guide the WTO's work in this area.  He agreed that transparency and the existing
notifications could be studied further.
115. The representative of Japan felt that several Members had misunderstood Japan's position on
fisheries subsidies.  He dismissed the perception that Japan was reluctant to eliminate subsidies in this
sector.  Japan fully supported the sustainable utilization of fisheries products and had to this end
scrapped 132 long line fishing vessels earlier in the year.  He stressed the need to look beyond
subsidies at the other negative factors that were responsible for the over exploitation of fisheriesresources, such as illegal fishing.  This was very technical work that required expertise in fisheries
management and, therefore, Japan felt that the WTO was not the most appropriate place to tackle the
issue.  The FAO was much better equipped to deal with such problems and should proceed in
implementing its Plan of Action.  He said the WTO could play a supportive role by working inWT/CTE/M/21
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cooperation with the FAO to protect the fisheries sector.  This was a much more comprehensive
approach than just eliminating subsidies.  Finally,  he was cautious of the figures reflected in the
World Bank paper, as they were rough estimates of fisheries depletion.
116. The representative of Argentina said his country was facing serious losses in fish reserves and
had therefore cancelled a number of agreements promoting trade in fisheries.  Subsidies were
indirectly promoting illegal fishing by supporting fleets that operated against national laws.  He
supported the views put forward by New Zealand and Iceland that not all aspects of the fisheries
sector should be brought into the WTO, but subsidies could be addressed.  Further work was needed
to clearly define the WTO's role in dealing w ith the fisheries problem in relation to other
organizations doing so.
117. The representative of Australia welcomed New Zealand's paper as a timely contribution to the
Committee's consideration of the issues raised by those subsidies which encouraged overcapacity and
adversely affected sustainability in the world's fisheries.  A recent FAO report had drawn attention to
the problem "of having too many vessels or excessive harvesting power in a growing number of
fisheries", and the role of excessive fishing capacity in the degradation of fishery resources, the
dissipation of food production potential and for significant economic waste.  The report noted that this
problem "manifests itself especially in the form of redundant fishing inputs and the overfishing ofmost valued fish stocks".  (FAO, "The Management of Fishing Capacity: A New but Crucial Issue for
Sustainable World Fisheries", Docu ment FI:MM/99/2, February 1999).
118. The representative said a range of factors were involved in the threat to fish stocks posed by
excess capacity in world fisheries.  These included inadequate management regimes, the persistence
of relatively open access conditions in many fisheries, and the relative mobility of harvestingcapacity.  Action was needed in a range of international bodies to effectively deal with these
problems.  But there was also sufficient evidence that subsidies had been a major factor in promoting
overcapacity in fishing fleets, inefficiencies in production and overfishing.  The FAO Plan of Action
significantly included a commitment that States should reduce and progressively eliminate all factors,
including subsidies and economic incentives, which had contributed to the build-up of excessivefishing capacity.
119. As noted in the New Zealand paper, subsidies relevant to the fisheries sector had raised
important development as well as environment issues, with international trade in fishery products
representing a significant source of foreign exchange earnings for many developing countries.
Ensuring that developing countries could compete fa irly in international trade in fishery products was
one essential element in working to promote the go als of sustainable development in relation to the
fisheries sector.  The paper suggested recommendations for a balanced work programme by the WTO.Given the urgency and significance of the problems facing global fisheries, Australia believed that
there was a clear role for the WTO in complementing efforts under way in other  fora to address these
problems.  There was a need to identify how the WTO could support these efforts through full
implementation of existing WTO disciplines as well as considering the need and scope for building on
them.
120. The representative of Korea supported the Japanese view that subsidies were one of many
causes of over fishing capacity and a broader approach was needed to take into consideration all these
factors.  She suggested that Members should distinguish positive subsidies from negative ones that
were detrimental to the sustainable use of fisheries resources.  The positive ones could be utilized to
restructure the fisheries sector and strengthen training and technical capacity.  Further detailed workwas needed and the representative welcomed th e FAO's work in this area to guide the CTE.
121. The representative of the European Communitie s stated that his delegation was committed to
sustainable fisheries and subscribed to a number of the views expressed earlier.  He supported a
comprehensive approach that addressed the economic and social dimensions of the problem.  ThisWT/CTE/M/21
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could serve as an example of how environmental and sustainability objectives could be brought to
bear on specific policy areas to yield positive results.  The EC was open to discussions, provided
conclusions were not reached in advance.  Some subsidies had helped reduce capacity by addressing
certain social concerns related to fisheries and these should be encouraged.
122. The representative emphasized the need to tackle the other aspects of the problem related to
management issues, capacity control and monitoring the oceans.  He supported the FAO Plan of
Action and the work of the OECD and encouraged a number of key actors to play a more active role.
Several technical questions had arisen in the context of the differing figures being advocated by
different institutions, that needed to be resolved.  The WTO should be concerned with the trade-
related  aspects of the fisheries problem under the subsidies and countervailing duties agreement.  The
CTE' s mandate concerned sustainability and it was within that context that the Committee could
examine the issue as it has done and should continue to do.
123. The representative of Canada supported the FAO's Plan of Action, along with New Zealand
and Iceland's emphasis on the elimination of subsidies.  He said Canada had taken several measures
domestically to reduce the use of subsidies that had led to over capacity.  Further discussions in the
WTO were needed to clarify the exact kinds of s ubsidies that were detrimental to the environment,
particularly if the objective was to contemplate disciplines on certain government practices.  Canadasupported the use of positive subsidies that would lead to a sustainable and self-reliant fisheries sector
and the strategies outlined by New Zealand to achieve this end.
124. The representative of Chile thanked New Zealand and Iceland for their papers and endorsed
her delegation's commitment to the protection of the environment.  Given the importance of the
fisheries sector for the Chilean economy, national legislation had been introduced to protect marinespecies.  She said Chile did not offer subsidies and incentives that led to overcapacity and overfishing
and supported further discussions on the elimination of trade distortive subsidies, particularly in
agriculture.  The actions suggested by New Zealand served as a good starting-point to address this
issue.
125. The representative of Morocco shared the concerns of other Members and endorsed the
recommendations of the FAO.  He suggested the WTO should carry out some investigative and
analytical work within the framework of the SC M Agreement to establish certain disciplines that
would regulate the fisheries sector.
126. The representative of Egypt said his country did not subsidize its fishery sector and favoured
the elimination of trade-distorting subsidies.  He drew attention to Part 4 of the FAO Plan of Action
dealing with the mechanisms to promote implemen tation, especially the references in paragraph 43
thereof that called for support for capacity build ing, financial, technical and other assistance to
developing countries, as well as  paragraph 47, addressing the role of the FAO on the issue of in-
country technical assistance projects.
127. The representative of New Zealand said the responses of other Members to his delegation's
paper highlighted the extent of the problem and reflected a strong commitment to tackling the issue.
While the WTO examined the trade distorting aspects of subsidies, organizations such as the FAOshould continue to look at the other aspects beyond the scope of the WTO.  At the same time,
cooperation between the different key agencies needed to be enhanced.  He urged the WTO to focus
on trade-distorting subsidies, which were the real issue and said that some of the proposals made
could be acted upon immediately, such as the Secretariat updating its list of subsidies notified under
Article XV of the SCM Agreement.
128. The representative of Iceland thanked Members for their positive responses to his delegation's
paper and agreed that the problem of overfishing could not be resolved with one single measure.  It
was a complex problem that had many facets and needed to be addressed in many different fora.  ItWT/CTE/M/21
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was therefore critical to specify the mandate of each of these.  The subsidy aspect had to be resolved
in the WTO, but consideration had to be given to the various impacts of the different subsidies; both
positive and negative.
129. The representative of Japan was pleased that several Members also acknowledged the
initiatives taken by FAO.  However, further discussions were needed to determine the extent to which
the FAO should be involved in dealing with fisher ies subsidies.  As the SCM Agreement defined the
WTO's mandate to deal with fisheries subsidies, he requested the Secretariat to prepare a paper on the
implementation of the agreement.
130. The representative of Mexico felt that subs idies could be addressed in the WTO Committee
on Subsidies.  However, environmental aspects should be dealt with in the CTE.
131. The representative of Costa Rica recalled document WT/CTE/W/106 submitted by Uruguay
on behalf of 14 countries at the last meeting, which emphasized that the CTE should examine the
environmental benefits of removing trade restrictions and distortions, particularly export subsidies in
agriculture.  The document had urged the WTO to give prior consideration to the elimination of
export subsidies.
132. The representative of Norway commented on papers submitted by Australia
(WT/CTE/W/105) and Brazil (WT/CTE/W/109) at the last meeting.  The environmentally-damaging
activities outlined by Brazil, such as the use of pe sticides, were echoed in the preliminary findings of
Norway's paper (WT/CTE/W/100).  The empirical findings from that paper had suggested there was
no clear relationship between environmental degradation and the level of support provided by
different countries.  With reference to non-trade concerns, Brazil's paper had rightly pointed out that
the concept of multi-functionality of agriculture in relation to environment had to be considered in auniversal perspective.  As agriculture contributed to food security and the viability of rural areas in
developing countries, Norway supported such a broad based approach; these aspects were of such a
nature that might require special government intervention.  In that context, one major challenge was to
ensure that policy measures were designed in the least trade distortive manner.
133. The Norwegian representative agreed with the Australian paper that poorer communities were
worst affected by environmental degradation.  Trade policy reforms did not necessarily contribute to
changing this pattern.  He stressed that potential affects on poor communities were not contingent on
support policies, but rather on the applied design of the policy measures.  The question of equity was
another important issue, as liberalization in itself did not automatically lead to poverty reduction; but
would have to be accompanied by policies geared towards reducing inequities.  Norway fully
supported the need for preferential and differential treatment, including preferential market access
opportunities for least developed countries.  Trade-related technical assistance measures were ofmajor importance to the integration of the LDCs into the trading system.  Policies related to trade,
environment and poverty reduction had to take into account a wide range of factors, within the WTO
and beyond, at the national and international level.
134. The representatives of Brazil and Australia
 welcoming Norway's comments on their
delegations' papers, which they would reflect u pon, looked forward to further comments from other
Members at the next meeting.
135. The representative of Guatemala endorsed Costa Rica's call for the reduction of export
subsidies in agriculture.
136. The representative of the European Community proposed an item for discussion at the next
CTE meeting on the general exceptions clause under the GATS Article XIV, in the context of the
reformulated Gasoline and Shrimp-Turtle cases.WT/CTE/M/21
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137. The Chairman concluded that the discussions had been useful and interesting and that there
was a consensus to continue this dialogue.  Ne w Zealand and Iceland's papers had touched on a
burning issue, which had received the support of many delegations.  Others, however, had expressed
some reservations and doubts.  Based on the discussions and proposals, the Chairman put forward two
proposals:  (i) to invite the FAO to keep the CTE info rmed on the progress of its activities in this area;
(ii) to invite the Secretariat to present an updated paper on the fishing subsidies under Article XXV of
the SCM agreement.  He said that the EC's proposal could be included under item nine of the Agenda
for the October meeting.
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