WORLD TRADE
ORGANIZATIONWT/CTE/W/183
15 March 2001
(01-1282)
Committee on Trade and Environment Original:  English/
                  French
FRAMEWORK FOR CONDUCTING ENVIRONMENTAL ASSESSMENTS
OF TRADE NEGOTIATIONS
Communication from Canada
I. EXECUTIVE SUMMARY
1. The Government of Canada is committed to sustainable development.  As part of this
commitment and in keeping with the 1999 Cabinet Directive on the Environmental Assessment of
Policy, Plan and Program Proposals , Canada will conduct Strategic Environmental Assessments of
trade negotiations.  This framework establishes the process and analytical requirements for conducting
such assessments.  A Strategic Environmental Assessm ent, referred to simply as an "environmental
assessment" in this framework, is a systematic process of identifying and evaluating likely and
significant environmental impacts of an initiative.  The objective of such an assessment is to integrateenvironmental considerations into the decision-making process from the earliest stages of an
initiative.
2. The framework is organized into two main parts.  Part 1 identifies the importance of
recognizing environmental considerations of trade and describes how the framework will contribute to
mutually supportive trade and environmental policy.  Part 2 outlines the process and analyticalrequirements for undertaking an EA of a trade negotiation.
3. The framework was prepared on the premise that liberalized trade provides benefits to
Canada.  With the value of exports representing 45 per cent of our gross domestic product, liberalized
trade contributes to economic growth and higher liv ing standards for Canadians.  Potentially, trade
liberalization can have a positive impact on the environment by improving the efficient allocation of
resources, promoting economic growth, increasing general health and welfare and generating
revenues that can be used for environmental improvement.  However, in the absence of effectiveenvironmental policies and regulations, increased economic activity generated by trade liberalization
can contribute to environmental problems.
4. Undertaking environmental assessments is an effective way to address such potential
problems and to protect the environment by improving overall policy coherence at the national level
and by assisting decision-makers to understand environmental implications of trade policy.  Anenvironmental assessment of a trade negotiation has two key objectives:
• To assist Canadian negotiators integrate environmental considerations into the
negotiating process by providing information on the environmental impacts of the
proposed trade agreement;  and
• to address public concerns by documenting how environmental factors are being
considered in the course of trade negotiations.
5. It is also acknowledged that assessing the environmental impacts of trade negotiations is a
complex task and the exercise will be challenging.  Answers to important questions are sometimes
elusive.  As pioneers in this new field of analysis, we are learning as we go and will need to explore
various assessment techniques to overcome data and methodological limitations.WT/CTE/W/183
Page 2
6. The framework is intended to be flexible and generic so that it can be adapted and applied to a
variety of trade negotiations on a case-by-case basis according to the nature of the agreement to be
negotiated.  However, the process does outline basic requirements regarding the timing and methods
of engaging the public and private sectors and civil society in environmental assessments.  Required
outputs and decisions are also identified at each step.  The process of conducting an EA corresponds
to the timing of the proposed trade negotiation and will involve the following steps:
• Announce intent to conduct an EA (when trade negotiation announced);
• prepare an Initial EA (released in advance of negotiation);
• prepare a Draft EA (released at the start of negotiation);  and
• prepare a Final EA Report (released after negotiation concludes).
7. Environmental Assessment (EA) Committees will be formed to undertake the analysis
required to complete the environmental assessments.  Coordinated by the Department of
Foreign Affairs and International Trade, EA Committees will include representatives from federal
government departments and agencies.  While membership of the EA Committees will vary accordingto the nature of the proposed negotiations, Environment Canada and the Canadian Environmental
Assessment Agency will always be represented.  When necessary, participating departments and
agencies may elect to engage independent research bodies to undertake some of the required analysis.
8. The method of undertaking the analysis is outlined in four stages:
• Identify the economic effect of the negotiation;
• identify the likely environmental impacts of such changes;
• assess the significance of the likely environmental impacts;  and
• identify enhancement/mitigation options to inform the negotiations.
9. EA Committees will apply the four stages of analysis to prepare the Initial EA and Draft EA.
The Draft EA will be used by negotiators during the negotiations.  If necessary, further analysis would
be undertaken during the negotiations using the same analytical stages.  Illustrative lines of inquiry
are provided in the framework to assist in the an alysis.  A Final EA report will be issued at the
conclusion of the negotiations to summarize the outcomes in relation to the Draft EA and torecommend any follow-up or monitoring actions.
10. The Government of Canada is most grateful for the valuable contributions from numerous
individuals in the public and private sectors in preparing this framework.  We will continue to seek
the views and expertise of Canadians as we begin the exciting and challenging task of applying the
framework.
II. BACKGROUND:  CANADA AND TRADE NEGOTIATIONS
A. I
NTRODUCTION
11. The Government of Canada is committed to sustainable development.  Mutually supportive
trade and environmental policies can contribute to this commitment.  Toward this end, the Minister
for International Trade, with the support of his Cabinet colleagues, has directed trade officials to
improve their understanding of, and information base on, the relationship between trade and
environment issues at the earliest stages of decision-making, and to do this through an open andinclusive process.  The environmental assessment of trade negotiations is critical to this work.WT/CTE/W/183
Page 3
12. In keeping with the 1999 Cabinet Directive on the Environmental Assessment of Policy, Plan
and Program Proposal1, Canada will conduct Strategic Environmental Assessments of trade
negotiations.  A Strategic Environmental Assessmen t, referred to simply as an environmental
assessment in this framework, is a systematic process of identifying and evaluating likely and
significant environmental impacts of an initiative.  The objective of such an assessment is to integrate
environmental considerations into the decision-making process from the earliest stages of aninitiative.
13. This framework establishes a process for conducting environmental assessments of trade
negotiations.  The resulting environmental assessments, in turn, are intended to assist trade negotiators
to factor environmental considerations into the negotiations of trade agreements.  The assessments
will endeavour to sensitize negotiators to the likely significant environmental impacts of trade
agreements, improve awareness and understanding of the trade and environment linkages and promote
improved coherence of trade and environmental policies.  The environmental assessment process mayalso help to identify opportunities for building capacity for environmental protection.
14. This framework is intended to be flexible enough  to be applied to current and any future trade
liberalizing negotiations in the World Trade Organization (WTO), the Free Trade Area of the
Americas (FTAA) and in bilateral Free Trade Agreements (FTAs).  It should be noted that this
framework is not intended to apply to agreements that are negotiated to resolve bilateral trade disputesdue to the dynamic nature of such negotiations and the unpredictable timing involved.  However, this
does not preclude consideration of environmental issues.
15. Development of this framework involved input  from numerous stakeholders and their views
and expertise will continue to be sought at specific stages throughout the conduct of environmental
assessments.
16. The Government of Canada sees no contradiction between liberalized trade and
environmental protection. Canada’s economy benefits immensely from international trade, with the
value of exports representing 45 per cent of our gross domestic product.  Potentially, trade
liberalization can have a positive impact on the environment by improving the efficient allocation of
resources, promoting economic growth, increasing general health and welfare and generatingrevenues that can be used  for environmental improvement.  Increased economic activity generated by
trade liberalization can contribute to environmental problems if domestic policies are distorting, or if
there is an absence of effective environmental policies and regulations.
17. The prime objective of liberalized trade is to contribute to economic growth and higher living
standards for Canadians. The government recogniz es and appreciates that economic growth, for its
own sake, does not always lead to positive outcomes.  Ideally, the best way to  mitigate any negative
effects of economic growth (social, economic, or environmental) is through appropriate domestic
policy, not through prescriptive measures within trade agreements.
18. It is becoming increasingly clear that economic and environmental concerns need to be
considered in conjunction with social issues.  However, more study and understanding is needed to
determine the most effective and appropriate ways to consider these factors collectively.  Recognizing
that it is imperative to integrate the social implications in the long term, it is vital to take action toachieve the best possible results now on the environment-trade interface.  It could also be argued that
the furthering of environmental protection in trade policy carries with it a social benefit in that a
healthy environment benefits the well-being of the people who inhabit it.
                                                     
1See Annex 1 for the 1999 Cabinet Directive on the Environmental Assessment of Policy, Plan and
Program Proposals.WT/CTE/W/183
Page 4
B. ASSESSING THE ENVIRONMENTAL IMPACTS OF TRADE NEGOTIATIONS
19. The Department of Foreign Affairs and International Trade (DFAIT) has been leading a
federal inter-departmental process over the past year to prepare a framework for conducting
environmental assessments of trade negotiations.  This work is being conducted in a transparent and
systematic manner through engagement with the prov inces and territories, aboriginal groups, business
groups and the public.  The information gleaned from environmental assessments will provide
valuable input to any future ex post  environmental review of a trade agreement.
20. It is important to note the difference between an environmental assessment of a policy, such
as a trade negotiation, and an environmental assessment of a project.  The latter is a requirement under
the Canadian Environmental Assessment Act  and does not relate to the proposed framework.  Rather,
this framework was prepared in response to the 1999 Cabinet Directive on the Environmental
Assessment of Policy, Plan and Program Proposals  that requires federal departments and agencies to
undertake strategic environmental assessments of policy proposals.  While the process for conducting
an environmental assessment of policy may appear similar to a project assessment, the two are
different and should not be confused.  A policy assessment is best characterized as a forecasting tool
to anticipate environmental impacts and/or opportunities.  The difficulty in undertaking such a process
involves dealing with a host of data limitations and uncertainties, timing issues and numerous othercomplexities not commonly associated with project-based environmental assessments
21. Canada participates in international discussions on the environmental assessment of trade
policy in a variety of fora, including the World Trade Organization (WTO), the Organization for
Economic Cooperation and Development (OECD), as well as in the North American Commission for
Environmental Cooperation (NACEC).  In December 2000, the United States government releasedfinal guidelines for conducting environmental re views of trade agreements in keeping with the
President’s 1999 Executive Order.  Other countries, su ch as Norway, have already identified sectors
of special interest and are undertaking environmental reviews or assessments.  The
European Commission (EC) has opted for a more general qualitative sustainability impact assessment.
See Annex 2 for a summary of the state of the work on this subject.
22. Some of the most challenging environmental issues that we face today are transboundary or
global in scope and can only be fully addressed through global actions.  Global solutions are required
to address issues such as climate change, ozone depletion, persistent organic pollutants  and the
depletion or pollution of common resources like oceans, while bilateral and regional solutions are
required to address such issues as acid rain or endangered migratory species.  Multilateralenvironmental agreements (MEAs) are a more appropriate mechanism than trade agreements to
address these issues.  It is important to note th at the environmental assessments resulting from this
framework will not endeavour to integrate trade negotiations with environmental negotiations.
However, it is important, as Canada has advocated, to clarify the relationship between multilateral
environmental agreements and trade agreements and to ensure that they are mutually supportive.
C. O
BJECTIVES OF AN ENVIRONMENTAL ASSESSMENT OF TRADE NEGOTIATIONS
23. An environmental assessment of trade negotiations is an important decision-making tool for
promoting sustainable development.  Environmental assessments of trade negotiations can  contribute
to more open decision-making within the federal government by engaging representatives from other
levels of government, the public, the private sector and non-governmental organizations in this
process.  Environmental assessments can also improve overall policy coherence at the national level
by assisting decision-makers to understand environmental implications of trade policy.
24. In sum, an environmental assessment of a trade negotiation has two key objectives:WT/CTE/W/183
Page 5
• To assist Canadian negotiators integrate environmental considerations into the
negotiating process by providing information on the environmental impacts of the
proposed trade agreement;  and
• to address public concerns by documenting how environmental factors are being
considered in the course of trade negotiations.
D. CHALLENGES OF ASSESSING THE ENVIRONMENTAL IMPACTS OF TRADE NEGOTIATIONS
25. Assessing the environmental impacts of trade negotiations is a complex task and answers to
the questions it raises are sometimes elusive.  As pioneers in this new field of analysis, we are
learning as we go and will need to explore various assessment techniques.  This framework is an
initial attempt to outline a step-by-step process for undertaking environmental assessments of trade
negotiations.  It is not designed to be prescriptive or to provide a "one size fits all" approach but one
that will be adapted and applied on a case-by-case basis according to the nature of the agreement to benegotiated.  It is also not a final product, but a living document that will be periodically updated as we
gain experience and knowledge.  The framework will be posted on DFAIT’s website
(http://www.dfait-maeci.gc.ca/tna-nac/social-e.asp#environment) along with a compendium of
resource materials.
26. Conducting an environmental assessment of a trade negotiation presents significant
challenges:
• Methodologies for strategic environmental assessments of policy issues, including
trade negotiations, are new and evolving.  There is no single "best " methodology for
conducting such an assessment and not all methodologies are appropriate in all
circumstances.
• Although Canada has undertaken ex post reviews of trade agreements, we have yet to
conduct an ex ante  environmental assessment of trade negotiations on the scale
proposed in this framework.
• Currently, there are significant limitations in data and information to establish
definitive quantitative economic effects of trade negotiations and subsequent
environmental impacts.
• It is difficult (and sometimes impossible) to isolate the environmental impacts of a
specific trade agreement from other agreements or from factors external to trade.
• The assessment process proposed in this framework has the potential to be a dynamic
exercise, as it may have to focus on a "moving target."  As negotiations evolve, newand unanticipated issues may arise that may necessitate further analysis and response.
• Not all issues can be considered at once.  A scoping exercise will need to be carried
out in the early stages of the environmental assessments to help identify the most
significant and likely environmental impacts.  Consistent with the 1999 Cabinet
Directive , resources will need to be focused on those issues where the environmental
impacts are likely and significant.
III. FRAMEWORK FOR CONDUCTING ENVIRONMENTAL ASSESSMENTS OF
TRADE NEGOTIATIONS
27. The Department of Foreign Affairs and International Trade (DFAIT), in consultation with
other federal government departments and agencies, will conduct environmental assessments of trade
negotiations.  An Interdepartmental Steering Committee, coordinated by DFAIT with representatives
from relevant federal government departments and agencies will be responsible for ensuring thatWT/CTE/W/183
Page 6
assessments are conducted for all new trade agreements in a consistent manner and in accordance with
the process outlined in this framework.
28. Environmental assessments will be initiated as part of the process for developing Canada’s
negotiating objectives.  Environmental Assessment (EA) Committees will be formed to undertake the
analysis required to complete the environmental assessments.  While membership of the EA
Committees will vary according to the nature of the proposed negotiations, Environment Canada andthe Canadian Environmental Assessment Agency will always be represented.  Likewise, negotiators
for the proposed agreements will always be represented on the EA Committees.  DFAIT will be
responsible for ensuring that the necessary resources for undertaking the environmental assessments
are identified and allocated in accordance with Treasury Board guidelines.  When necessary, the EA
Committee and participating departments and agencies may elect to engage independent research
bodies to undertake some of the required analysis required to complete the assessments.
29. In undertaking environmental assessments, the EA Committees will seek the advice of
Sectoral Advisory Groups on International Trade (SAGI Ts) that advise the Minister of International
Trade on trade-related issues.  SAGITs are composed of individuals from business and industry
groups, environmental non-governmental organizations (NGOs) and academic institutions.  While the
advice provided by SAGITs to the Minister is conf idential, their views will be helpful in the early
stages when the EA Committee is establishing the scope of an assessment and criteria to determinesignificance.  SAGIT advice will also be helpful during the negotiations.  A SAGIT sub-committee
will also be formed specifically to provide input on EAs conducted as appropriate.  Members would
be drawn from the various SAGITs and would include individuals from environmental NGOs,
industry representatives, and academics.
30. Existing tools will be improved, or new ones developed, such as handbooks and checklists, to
assist negotiators in integrating environmental cons iderations into the negotiating process.  DFAIT
will develop a database to provide a more active and immediate communication link to the public and
to solicit input on the environmental assessments of trade negotiations.
31. The framework is designed to be applied to negotiations on an agreement-by-agreement basis.
In the context of a comprehensive multilateral trade negotiation, for example at the WTO,agreement-by-agreement analysis would be unde rtaken, the results of which would then be
consolidated and assessed in an integrated manner before the negotiations conclude.  The level and
scope of analysis undertaken would be determined on a case-by-case basis according to the nature of
the agreement to be negotiated and the significance of the likely environmental impacts.
32. While many environmental issues should be examined in the global context to be most
completely understood, limited data, sovereignty issues, limited resources and practicality demand
that the primary focus of such assessments, at this time, be on assessing the most likely and significant
environmental impacts of trade negotiations in relation to the Canadian environment.  Although the
proposed framework calls for  national assessments,  trans-boundary, regional and global
environmental impacts will be considered if they have a direct impact on the Canadian environment.
A. T
HE PROCESS FOR CONDUCTING ENVIRONMENTAL ASSESSMENTS OF TRADE NEGOTIATIONS
33. The key elements of the proposed process for conducting an environmental assessment (EA)
correspond to the trade negotiation process.  An overview of the process for conducting an EA is
provided in Table 1.  This section outlines the procedural steps that will be undertaken to conduct an
EA.  Section 2.2 outlines the analy tical framework to prepare an EA.
34. Conducting an EA will involve the following steps:WT/CTE/W/183
Page 7
• Notice of intent to conduct an EA (announced when trade negotiation announced);
• preparation of an Initial EA (released in advance of negotiation);
• preparation of a Draft EA (released at the start of negotiation);  and
• preparation of a Final EA Report (released after negotiation concludes).WT/CTE/W/183
Page 8Table 1:  Overview of Process to Conduct En vironmental Assessments of Trade Negotiations
   Approximate Duration Weeks - Months Months - Years Months
Stage of
Negotiations
Announce Trade
NegotiationsPrepare for Negotiations Negotiations Conclude Negotiations
Corresponding
Environmental
Assessment
(EA) Actions
Announce intent to
conduct EAPrepare initial EA Prepare Draft EA Use draft EA Final EA ReportWeeks
-
Months
Analytical
Framework
(How)
Who does the
work?
EA CommitteesScoping exercise to determine
- Economic effect
- Environmental impact- Significance impact
- Enhancement /mitigation
options
EA CommitteesElaboration of initial EA to
examine
- Economic effect- Environmental impact
- Significance impact
- Enhancement/mitigation
options
EA CommitteesDraft EA informs the
negotiators during
negotiations.  If required,
further analysis would
examine:
- Economic effect
- Environmental impact
- Significance impact
- Enhancement/mitigation
options
EA CommitteesFinal EA and report on
outcomes of the
negotiations.
Any notable
divergence from Draft
EA and environmental
implications?
EA Committees
Weeks
-
MonthsEngagement
Engagement
mechanismsFederal Departments
and agencies
SAGITs
C-Trade
"Experts"Public
Gazette notices
and/or Website
postingsDirect notices
Press ReleasesFederal departments and
agencies
SAGITs
C-Trade
"Experts"Public
Gazette notices and/or
Website postings
Direct noticesOther consultations as
appropriateFederal departments and
agencies
SAGITs
C-Trade
"Experts"Public
Gazette notices and/or
Website postings
Direct noticesOther consultations as
appropriateFederal departments and
agencies
SAGITs
C-TradeFederal departmentsand agencies
SAGITs
C-Trade
"Experts"Public
Gazette notices and/or
Website postings
Direct noticesOther consultations as
appropriateWT/CTE/W/183
Page 9Weeks
-
MonthOutputs
(What)
DecisionsGazette Notice
and/or  DFAIT
Internet Notice
Determine
appropriate method
and length ofengagementGazette Notice and/or DFAIT
Internet Notice
Initial Assessment briefly
identifies the anticipated issuesand analysis to be assessed in
Draft EA
Determine appropriate method
and length of engagement (+/- 60
days)
Further environmental
assessment necessary?  If yes,
proceed to Draft EA;  if no, issue
Initial EA and process complete.Draft EA elaborates the
likely and significant
environmental impacts and
identifies proposedmitigation/enhancement
options
Are the likely and significant
adverse environmentalimpacts mitigable?
Determine appropriate
method and length of
engagement (+/- 60 days)Negotiators will consider
the findings of the Draft
EA during the conduct of
negotiations and any new
analysis required would
be conducted by the EA
Committee as
negotiations evolve.Final EA Report
Recommended
follow-up andmonitoring actions?WT/CTE/W/183
Page 10
(a) Notice of Intent to Conduct an EA
35. When a trade negotiation is announced, a notice of intent to conduct an environmental
assessment will also be publicised in the Canada Gazette  and/or posted on DFAIT’s website.  An EA
Committee will be formed at this step that reflects the nature of the proposed trade negotiation.  The
purpose of this step is to publicise the intention to conduct an EA, and to invite comments on
environmental matters related to  the proposed negotiations.  Views from other levels of
government, aboriginal groups, SAGITs, business groups and the public will be sought on
environmental matters relating to the proposed negotiations in order to help prepare an initial
environmental assessment.  Comments would be soug ht for 60 days unless a shorter or longer period
is considered appropriate.
(b) Initial EA36. Following the Notice of Intent and the period of public comment, an Initial EA will be
publicised in the Canada Gazette  and/or posted on DFAIT’s website.  DFAIT will prepare the Initial
EA following discussions and consultations with the EA Committee and representatives of other
levels of government, aboriginal groups, SAGITs, business groups and the public.  The Initial EA will
be prepared using the analytical framework outlined in Section 2.2.  The fundamental purpose of
the Initial EA is to scope out the main environmental issues likely to arise as a result of the
proposed negotiations.  Comments would be sought for 60 days unless a longer or shorter period is
appropriate.  Comments received during the specified period would be used to help prepare the Draft
EA.
37. While Initial EAs will be conducted for a variety of trade negotiations, it may be determined
that a full environmental assessment is not required if significant environmental impacts are unlikely
to occur.  Such circumstances would be documented and publicised in the Initial EA and no further
action would be required.  Otherwise, further anal ysis would be undertaken to prepare the Draft EA.
(c) Draft EA38. A Draft EA will be publicised in the Canada Gazette  and/or posted on DFAIT’s website at
the start of negotiations.  DFAIT will prepare the Draft EA following discussions and consultations
with the EA Committee and representatives from other levels of government, aboriginal groups,
SAGITs, business groups and the public.  The Draft EA will be an elaboration of the Initial EA and
will employ the same analytical framework as outlined in Section 2.2.  The fundamental purpose of
the Draft EA is to inform the negotiators of the identified environmen tal concerns during the
conduct of negotiations.  Views on the Draft EA will be sought for 60 days unless a shorter or longer
period is considered appropriate.  Comments received during the specified period would be
considered during the course of negotiations.  This does not preclude the opportunity for comment at
any point during negotiations, particularly in the event that new issues would arise.
39. As the negotiations proceed, the trade activity under negotiation may touch on previously
unanticipated areas, thereby necessitating further analysis.  The identification of likely significant
environmental impacts may not be a one-time exercise.  Further analysis will be undertaken as
required and appropriate during the course of negotiations.  Given the confidentiality of the
negotiating process, further analysis during the negotiations would not normally be made public, but
would be documented in the Final EA Report issued at the conclusion of negotiations.  However, the
EA Committee would seek the advice of the SAGI Ts on an on-going basis throughout the negotiation
as discussed earlier.  Furthermore, in the event of prolonged negotiations, public updates would be
provided as appropriate by the EA Committee.WT/CTE/W/183
Page 11
(d) Final EA Report
40. A final environmental assessment report will be publicised in the Canada Gazette  and/or
posted on the DFAIT website after negotiations have concluded.  The purpose of the Final EA
Report is to document the outcome of negotiations in relation to the EA process.  The Final EA
Report would identify any notable divergence from th e Draft EA, subsequent analysis undertaken and
the anticipated environmental implications.  The document would also note any additional
information or comment received from the public on the EA during the course of negotiation.  The
EA Committee would use the final report to help noti fy other levels of government, aboriginal groups,
business groups and the public of any final recommendations for mitigation and/or enhancement
measures and any proposed follow-up actions to monitor the environmental impacts of the negotiated
agreement.  Comments on the Final EA Report would be welcome from the public.  The framework
will be periodically updated on the basis of experience and new information.
41. The Final EA Report would also be useful for internal and external verification or audit
exercises.  It will be particularly useful for conducting any ex post  environmental review of the new
agreement in question.  Similarly, the Commissioner of the Environment and Sustainable
Development, under the auspices of the Office of the Auditor General, may wish to use the Final EA
Reports for environmental audit purposes.
B. ANALYTICAL FRAMEWORK TO CONDUCT AN ENVIRONMENTAL ASSESSMENT OF TRADE
NEGOTIATIONS
42. The previous section outlined the procedural steps to conduct an EA.  This section outlines
the analytical methodology to undertake an EA.  The analysis will rely largely on existing
information, augmented as necessary by additional research.  Analysis will include quantitative andqualitative techniques and apply local and traditional knowledge when appropriate.  As noted earlier,
an EA of a trade negotiation has the potential to be a dynamic exercise, as it may have to focus on a
"moving target."  As such, the analytical stages described here may have to be undertaken at various
points during the EA process.  Regardless of when the analysis is undertaken during the course of an
EA, the same analytical stages would be applied.
43. There are four stages in the analytical framework:
Stage 1:  Identification of the economic effect of the negotiation
Stage 2:  Identification of the likely environmental impacts of such changes
Stage 3:  Assessment of the significance of the identified likely environmental impacts
Stage 4:  Identification of enhancement/mitigation options to inform the negotiations
Stage 1:   Identification of the Economic Effect of the Agreement to be Negotiated
44. The purpose of this stage is to identify the tr ade liberalization activity of the trade agreement
to be negotiated.  This stage will first identify what the potential agreement would entail and the
overall economic relevance  of the agreement to Canada.  This will help to determine the scope of
analysis required for the environmental assessment and to prioritize the issues to be assessed.
45. Employing largely existing information, the nature and scope of the agreement to be
negotiated and its economic relevance to Canada could be analysed by pursuing the following
illustrative lines of inquiry:
− What is the nature of the agreement to be negotiated?
− What are Canada’s goals in these negotiations?WT/CTE/W/183
Page 12
− What sectors of the economy might be affected by the agreement and in what ways?2
− Will the agreement likely increase or decrease the imports or exports of specific types of
goods, services, or investments?
− Will the agreement likely lead to increased or decreased consumption of specific products or
services?
− Is the agreement likely to decrease or eliminate tariffs?
− Are exports in the affected sectors subjected to tariff escalation (where tariffs increase with
the level of value-added processing) such that economic considerations favour the export of
unprocessed, raw materials?
− Is it likely to lead to tighter disciplines on subsidies?
46. Analysis during this stage would also endeavour to determine, when appropriate, if and how
the trade liberalization activity could affect issues such as, for example:
− Trade flows (product or technology);
− economic activity (scale and structural3; and/or
− unique effects on the provinces or territories (other than the ability to regulate).
47. The ability to regulate or legislate  refers to the likely legal and/or policy effects of
agreements.  Positive effects may result when appropriate environmental regulations, standards or
other measures are in place to address macro- and micro-economic changes.  Negative effects mayresult when appropriate environmental policies or regulations are not present, or if the agreement
impedes the development or implementation of such policies or regulations.
48. The effects of  trade flows  cover both products and technology, including services.  Product
effects  pertain to changes in trade flows of products . Positive effects may result when an agreement
leads to increased trade in beneficial products, such as energy-efficient goods.  Negative effects mayresult if the agreement leads to an increase in the production and trade of products that have direct or
indirect negative impacts on the environment.  Technology effects  relate to changes in the flow of
technologies, for example, technologies that reduce the resource requirements (energy, inputs) or
reduce or eliminate pollution that may otherwise result from production.
49. The effects on economic activity  include both scale and structure.  Scale effects  refer to
changes in the overall level of economic activity or macro-economic effects of trade agreements.
Positive effects may result from economic growth and financial gains when appropriateenvironmental policies or regulations are in place.  In the absence of such policies or regulations, or
when they are impeded or not enforced, negative environmental effects may result, such as
unsustainable resource use or pollution resulting from trade-related increases in transportation.
Structural effects  refer to the changes in the patterns of economic activity or micro-economic effects
of trade agreements.  Positive effects may result when the agreement promotes the efficient allocation
of resources and efficient patterns of production and consumption.  Negative effects may result when
the patterns of consumption are inefficient or unsustainable and/or when appropriate policies and
regulations are not present.  Baseline scenarios may be established as appropriate at this stage to help
measure the changes resulting from the trade negotiations.
                                                     
2Sectoral analysis would be based on the classification system outlined in Annex 3, unless another
classification system would be more appropriate.  For example, an EA of the WTO Services Agreement wouldemploy the unique sectoral classification system designed for that agreement.
3Discussion of regulatory, product, technology, scale and structural effects based on OECD, 1994.WT/CTE/W/183
Page 13
Stage 2:   Identification of the Likely Environmental Impact of Such Changes
50. Once the economic effects of the trade agreement have been estimated, the likely
environmental impacts of such changes are approximated.  The EA will also identify those positive
environmental benefits that might arise from th e negotiations in the form of environmentally
"friendly" technologies and capacity-building initiatives.
51. For the purpose of this framework, "environment" refers to the components of the Earth,
including land, water, air, including all layers of the atmosphere, all organic and inorganic matter and
living organisms (including humans) and the interacting natural systems that include components of
the foregoing.
52. Examples of questions to assist with the determination of likely environmental impacts -
positive, negative, unknown, or neutral - may include:
− Will the trade negotiations be consistent with Canada’s existing commitments under
multilateral environmental agreements (MEAs), such as the Montreal Protocol, the
Bio-diversity Convention, the Kyoto Protocol, etc.?
− Will the trade agreement affect the federal/provincial/ territorial governments’ ability to
regulate environmental protection or to enhance environmental benefits?
− Will the trade negotiations affect the achievement of an environmental quality goal (e.g.,
reduction of greenhouse gas emissions or protection of endangered species)?
− Will the trade negotiations affect the number, location, type and characteristics of initiatives
which would be subject to project-level environmental assessment, as required by the
Canadian Environmental Assessment Act  or an equivalent process?
− Will the trade negotiations promote or discourage the transfer of environmentally-responsible
technologies?  Will it involve a new process or delivery arrangement with environmentalimplications?  Are there any trade-related obstacles to the diffusion of cleaner technologies?
− Will the trade negotiations increase or decrease the availability of environmental goods and
services, the consumption of ecologically sensitive inputs, the movement ofenvironmentally-hazardous goods, or any other environmental externalities?
Stage 3:   Assessment of the Significance of the Identified Likely Environmental Impacts
53. If likely environmental impacts are identified, they will be assessed as to their significance.
Possible factors to determine significance include:
− What is frequency and duration of the impact?
− What is the geographical scope and magnitude of the impact?
− Is there an established high level of risk to  the environment associated with the impact?
− What sectors will be affected and what is the environmental relevance of those sectors?
− Are the impacts irreversible?
− Are the impacts likely to lead to cumulative impacts?
− Are there possible synergies among the impacts?
54. Additional criteria to determine the degree of significance will be developed as appropriate.
This is an area where the views of SAGITs and outside "experts" will be particularly useful.WT/CTE/W/183
Page 14
55. This stage will require an initial survey of related existing information from various sources
to help identify information gaps and areas where further work may be required.   Every effort would
be made to use or update relevant existing information and analysis.  Once gaps in the information
base have been identified and once resource requirements have been identified and allocated, further
consultations with environmental assessment expert s, provinces and territories, aboriginal groups,
business groups and the public may be required to determine how and to what extent analysis will beundertaken to ascertain the magnitude of the likely environmental impact.  This will include an
analysis of those sectors that are clearly identifiable as being the subject of the agreement being
negotiated and to which environmental impacts are attributable.  An overriding consideration is that
the level of effort in conducting any analysis will  be commensurate with the level of anticipated
environmental impact.
56. If it is determined that no likely significant environmental impacts will result from the trade
agreement to be negotiated, this will be documented and no further assessment action should berequired.  However, environmental factors will continue to be considered on an on-going basis
particularly as new information arises during the course of negotiations.
Stage 4:   Identification of Enhancement/Mitigation Options to Inform the Negotiations
57. Previous stages of analysis identify the likely and significant environmental impacts of
negotiations.  Stage four identifies the policy options or actions to address negative impacts and to
enhance positive impacts.
58. Generally, the analysis in the previous stages will have been undertaken in a consolidated
fashion.  However, more complex or comprehensive trade agreements may require various aspects to
be studied in a disaggregated manner.  For such cases, before identifying mitigation and/orenhancements options, the analyses conducted in the previous stages should be aggregated to
determine whether cumulative impacts are likely to occur.  Methods and tools will be developed to
combine and assess the agreement analyses collectively. In the context of a comprehensive
multilateral round of trade negotiations, such as at the WTO, negotiating timetables may not permit
public release of  the collective analysis until the Final EA Report is issued after the negotiationsconclude.
59. Once cumulative impacts have been considered, enhancement and mitigation options would
be identified.  The mitigation and enhancement options would assist the negotiators to identify, as
appropriate, what steps can be taken outside or within the negotiations to either address or enhance
environmental outcomes.  Examples of possible options include the establishment of new, ormodifications to existing programmes to address the likely negative environmental impacts identified
and/or enhance the likely positive impacts.  Additionally, there may be a need to establish
mechanisms for follow-up to monitor the outcomes of an agreement in the course of its
implementation.  Another example could be to work  with like-minded countries or organizations on
issues identified during the course of the assessment.
60. In the absence of regulatory measures and institutions to address likely and significant
negative environmental impacts, alternative policy re sponses to mitigate these impacts and to enhance
the positive environmental impacts, would be examined.  Again, because not all impacts can be
examined, efforts will be focussed on significant impacts as identified in stage 3.
61. In addition to identifying these options, other decisions that negotiators may make on the
basis of the results of environmental assessments include the following:
− Abandoning a negotiating position and developing a new approach;
− retaining the negotiating position;  orWT/CTE/W/183
Page 15
− retaining the negotiating position and taking other steps to mitigate the effects.
62. As noted, any new analysis undertaken during the course of negotiations due to new and
unanticipated issues would be documented and included in the Final EA Report.
C. PUBLIC PARTICIPATION
63. Environmental protection is a core Canadian value and priority.  Canadians have a say in the
development of Canada’s environmental policy and trade agenda.  Public input will continue to besought by the Government when undertaking environmental assessments of trade negotiations.  This
framework identifies the form and at what point pub lic input will be sought during an environmental
assessment of a trade negotiation. While the timing and scope of public participation will vary
depending on the nature of the agreement to be assessed, numerous opportunities for public
participation are proposed as outlined throughout Section 2.1.
64. Given the confidentiality of the negotiating process, re-evaluations during the negotiations
would not be shared with the public, but would be documented in the Final EA Report issued at the
conclusion of negotiations.  However, as noted in Section 2.1 (c), the EA Committees will seek the
advice of Sectoral Advisory Groups on Internatio nal Trade (SAGITs), comprising individuals from
environmental non-governmental organizations, th e private sector and academic institutions
throughout the environmental assessment process.  This would include any major new analysis
required, or re-evaluations of the draft environmental assessment during negotiations.
D. S
UMMARY
65. This framework document outlines the Government of Canada’s process for undertaking
environmental assessments of trade negotiations.  The principal goal of the environmental assessment
exercise is to ensure that likely and significan t environmental impacts of trade agreements on the
Canadian environment are taken into consideration during the negotiating process.  With input fromCanadians at specific stages of the environmental assessment process, the Government will also be
able to identify options for mitigating the likely and significant negative environmental effects, or
enhancing the positive effects.
For further information on this framework, contact:
The Environmental Services Division (AES)
Department of Foreign Affairs and International Trade
125 Sussex Drive
Ottawa, Ontario
K1A 0G2Canada
or by e-mail at:  aes@dfait-maeci.gc.ca
This framework will be periodically updated as experience is gained during its application.
Visit the DFAIT website to view updated versions of this framework and supplementary information
on environmental assessments of trade negotiations:
http://www.dfait-maeci.gc.ca/tna-nac/social-e.asp#environmentWT/CTE/W/183
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BIBLIOGRAPHY
Canada.  1999a.  Retrospective Analysis of the 1994 Canadian Environmental Review: Uruguay
Round of Multilateral Trade Negotiations . Ottawa.
http://www.dfait-maeci.gc.ca/tna-nac/menu-e.asp
- 1999b.  Strategic Environmental Assessment:  The Cabinet Directive on Environmental
Assessment of Policy, Plan and Program Proposals .  Ottawa.  http://www.ceaa.gc.ca
- 1999c.  Canada and the Future of the World Trade Organization:  Advancing a Millennium
Agenda in the Public Interest.  Report of the Standing Committee on Foreign Affairs and
International Trade.   Ottawa.
- 1994.  Uruguay Round of Multilateral Trade Negotiations:  Canadian Environmental Review .
Ottawa.  http://www.dfait-m aeci.gc.ca/tna-nac/menu-e.asp
- 1992.  North American Free Trade Agreement:  Canadian Environmental Review .  Ottawa.
http://www.dfait-maeci.gc.ca/tna-nac/menu-e.asp
Commission on Environmental Cooperation.  1999.  Assessing Environmental Effects of the North
American Free Trade Agreement (NAFTA) .  Montreal.  http://www.cec.org
- 1996.  NAFTA Effects -  A Survey of Recent Attempts to Model the Environmental Effects of
Trade:  An Overview and Selected Sources.   Montreal.
Esty, Daniel C.  1994.  Greening the GATT .  Washington.
Organization for Economic Cooperation and Development.  1999.  Methodologies For Environmental
Assessment of Trade Liberalisation Agreements .  Paris.
- 1994. Methodologies for Environmental and Trade Reviews .  Paris.
Shrybman, Steven.  1999.  The World Trade Organization:  A Guide for Environmentalists.
Vancouver.  http://www.wcel.org
United Nations Environment Programme and the International Institute for Sustainable Development.
2000.  Environment and Trade.   Winnipeg.  http://www.unep.ch/etu
United States.  2000.  Request for Public Comment:  Draft Guidelines for Implementation of
Executive Order 13141:  Environmental Review of Trade Agreements Notice of Public
Hearing.   Federal Register, Vol. 65, No. 133.
- 1999.  Accelerated Tariff Liberalization in the Forest Products Sector:  A Study of the
Economic and Environmental Effects .  Washington, D.C.  http://www.ustr.gov
- World Wide Fund for Nature.  1998.  Developing a Methodology for the Environmental
Assessment of Trade Liberalisation Agreements .  Gland.
World Trade Organization.  1999.  Special Studies 4:  Trade and Environment.   Geneva.
http://www.wto.orgWT/CTE/W/183
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GLOSSARY
Environment
Refers to the components of the Earth, including land, water, air, all layers of the atmosphere,
all organic and inorganic matter and living organisms (including humans) and the interacting natural
systems that include components of the foregoing.
Environmental Assessment (EA)
Used synonymously with "Strategic Environmenta l Assessment" in this framework, an EA is
a systematic process to identify and evaluate likely environmental effects of an initiative to ensure thatthey are fully considered and addressed from the earliest stage of decision-making.
Mitigation
The elimination, reduction or control of the adverse environmental effects that may result
from the proposed initiative under review.
Retrospective Analysis
The Retrospective Analysis is the 1999 follow-up study to the 1994 Canadian Environmental
Review of the Uruguay Round of the GATT.
Sector
A group of closely related industries.  See Annex 3 for more information on sector
classification.
Strategic Environmental Assessment
Used synonymously with Environmental Assessme nt (EA) in this Framework, a Strategic
Environmental Assessment is a systematic process to identify and evaluate likely environmental
effects of an initiative to ensure that they are fully included and addressed at the earliest stage of
decision making.  The term "strategic" is added to the title to distinguish the activity from
project-level environmental assessment.WT/CTE/W/183
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LIST OF ACRONYMS
DFAIT Department of Foreign Affairs and International Trade
C-TRADE Commerce-Trade Committee (federal-provincial/territorial)
EA Environmental Assessment
EC European Commission
FTAA  Free Trade Areas of the Americas
FTA  Free Trade Agreement
GATT General Agreement on Tariffs and Trade
MEA  Multilateral Environmental Agreement
NACEC  North American Commission for Environmental Cooperation
NAFTA North American Free Trade Agreement
NGO  Non-Government Organization
OECD  Organization for Economic Cooperation and Development
SAGIT Sectoral Advisory Group on International Trade
WTO  World Trade OrganizationWT/CTE/W/183
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ANNEX 1
THE 1999 CABINET DIRECTIVE ON TH E ENVIRONMENTA L ASSESSMENT OF
POLICY, PLAN AND PROGRAMME PROPOSALS
1. Consistent with the Government’s strong commitment to sustainable development, Ministers
expect that policy, plan and programme proposals of departments and agencies will consider, when
appropriate, potential environmental effects.
2. More specifically, Ministers expect a strategic environmental assessment of a policy, plan or
programme proposal to be conducted when the following two conditions are met:
(i) The proposal is submitted to an individual Minister or Cabinet for approval;  and
(ii) implementation of the proposal may result in important environmental effects, either
positive or negative.
3. Departments and agencies are also encouraged to conduct strategic environmental
assessments for other policy, plan or programme proposals when circumstances warrant.  An initiative
may be selected for assessment to help implement departmental or agency goals in sustainabledevelopment, or if there are strong public concerns about possible environmental consequences.
4. Ministers expect the strategic environmental assessment to consider the scope and nature of
the likely environmental effects, the need for mitigat ion to reduce or eliminate adverse effects and the
likely importance of any adverse environmental effects,  taking mitigation into account.  The strategic
environmental assessment should contribute to the development of policies, plans and programme son an equal basis with economic or social analysis;  the level of effort in conducting the analysis of
potential environmental effects should be commensur ate with the level of anticipated environmental
effects. The environmental considerations should be fully integrated into the analysis of each of the
options developed for consideration and the decision should incorporate the results of the strategic
environmental assessment.  Departments and agencies should use, to the fullest extent possible,existing mechanisms to involve the public, as appropriate and document and report on the findings of
the strategic environmental assessment.
For further information, or to view the Guid elines on Implementing the Cabinet Directive,
visit the Canadian Environmental Assessment Agency’s website:   http://www.ceaa.gc.ca/act/dir_e.htmWT/CTE/W/183
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ANNEX 2
OVERVIEW OF ANALYTICAL MODELS OR APPROACHES FOR ASSESSING THE
ENVIRONMENTAL EFFECTS OF TRADE AGREEMENTS
1. Much has been written in recent years about the relationship between trade and the
environment.  While there has been a good deal of research and analysis on the topic, there is very
little practical experience with the systematic environmental assessment of trade agreements.
Previous examinations that have attempted a broad approach to the assessment of environmental
effects of trade agreements, including the Canadian environmental assessment of the North American
Free Trade Agreement, have relied on qualitative methods of analysis.  It appears that quantitative
analysis has been reserved for specific case studies or sectoral examinations.
2. In preparing this draft Environmental Assessment Framework, a number of analytical models
or approaches for assessing environmental effects of trade agreements were considered.
3. In an agreement-by-agreement approach , the broad environmental effects of the agreement
would be identified and analysed in a series of steps.  The various agreement analyses would be
combined and analysed collectively toward the end of the exercise.  This is the method Canada has
chosen primarily for functional reasons.  Given that negotiations proceed on anagreement-by-agreement basis, the method proposed here would facilitate a coordinated approach to
data gathering and information analysis.
4. Although such an approach would be analytically challenging, it can help to keep the process
manageable and focussed, as not all issues would ha ve to be considered at once, while still allowing
for integrated analysis at various stages.  Another advantage of this approach is that the sectoral dataand information gathered can be used from one agreement to the next.  There are, however, two
disadvantages to this approach that should be acknowledged.  The first is that pertinent data and
information may not be readily available, or not at all;  however, this issue would have to be faced
regardless of the approach used for an Environmental Assessment.  Secondly, the agreement approach
may not identify some key issues of concern to Canadians until well into the process, or perhaps not atall, if those issues are not triggered by an agreement, or if a particular agreement is not re-opened for
negotiation.  This may create a perception that issues have been overlooked or avoided.
5. A variation of the agreement approach proposed here would be to conduct the analysis on a
sectoral basis  from the outset, rather than having the analysis flow from agreements.  This approach
would examine the broad economic and natural resource sectors (listed in Annex 3) vis-à-vis
Canada’s broad goals for negotiations at the WTO.  An advantage of this approach is that the study
could be undertaken within a specific time-frame and would not have to be tied to negotiating
schedules.  The disadvantage would be the lack of focus or specificity given that the detailed content
of the negotiations will not be known.
6. Another possible approach would be to conduct an "issue-based" analysis by identifying key
issues of concern to Canadians through consultations and focus groups.  These issues could then be
analysed vis-à-vis  their relationship to WTO agreements yet to be negotiated.  Possible issues might
include concerns with globalization;  perceived loss of sovereignty for decision-making and
regulatory powers;  various resource issues such as sustainable forest management, bulk-water
exports;  and agriculture-related issues such as chemical and pesticide use;  and genetically-modified
organisms.  This approach would be similar in scope to the WTO Special Study on Trade &
Environment, 1999.   The advantage of this approach would be that the study could be undertaken in a
specific time-frame, for example over the next 6-9 month period and would tackle the most prominent
issues related to Canada’s being party to the WTO.  There are two disadvantages to this approach.
First, it may lack focus and specificity, given the possibility that many of the issues may have noWT/CTE/W/183
Page 21
direct relation to WTO agreements under review.  Second, there may be a lack of consensus during
the process on what constitutes a key "issue".
7. The Commission on Environmental Coopera tion (CEC), established under the
North American Free Trade Agreement (NAFTA), has recently released an analytical framework for
assessing the environmental effects of NAFTA.  The CEC framework contains a broad listing of
factors to consider and incorporates elements from the OECD methodology (scale, structure,technology, product and regulatory effects).  Th e CEC framework has many useful elements that
could be used, especially the sections related to indicators of environmental effects.  Although the
framework is quite broad, it has not yet been fully applied and there appear to be no plans to do so in
the near  future.  It is acknowledged in the NAFTA analytical framework that the document has not
resulted in a conclusive assessment of all of NAFTA’s actual  environmental effects on the basis that
baseline data is not available and a definitive assessment not yet possible.
8. Finally, the "Sustainability Impact Assessment" approach employed by the European Union
was evaluated for its potential application to the Canadian context.  This approach focuses on broad
qualitative analysis techniques and some have argued that the findings are too general for an accurate
assessment.  A preliminary assessment was carried out, on the basis of three "scenarios" for trade
liberalization incorporating EU proposals (baseline,  intermediate and liberalization).  A particularly
useful element of the EU approach, which has been built into the Canadian framework is the conceptof establishing mitigating and enhancement measures for consideration.  The sustainability impact
assessment approach also conducts a review of the trading partner’s environmental and labour
standards.  This has drawn harsh criticism from developing countries that object to this scrutiny by
developed countries and claim that such assessments should be domestically focussed.WT/CTE/W/183
Page 22
ANNEX 3
THE NORTH AMERICAN INDUSTRY CLASSIFICATION SYSTEM (NAICS): CANADA
SECTORS
Source:   http://www.statcan.ca/english/subjects/standard/prefac.htm
1. The North American Industry Classification System (NAICS) is un ique among industry
classifications in that it is constructed within a single conceptual framework.  Economic units that
have similar production processes are classified in the same industry and the lines drawn between
industries demarcate, to the extent practicable, differences in production processes. This supply-based,
or production-oriented, economic concept was adopted for NAICS because an industry classificationsystem is a framework for collecting and publishing information on both inputs and outputs, for
statistical uses that require that inputs and outputs be used together and be classified consistently.
Examples of such uses include measuring productivity, unit labour costs and the capital intensity of
production, estimating employment-output relationships , constructing input-output tables and other
uses that imply the analysis of production relationships in the economy.  The classification conceptfor NAICS will produce data that facilitate such analyses.
2. NAICS divides the economy into twenty sectors.  Industries within these sectors are grouped
according to the production criterion.  Though the goods/services distinction is not explicitly reflected
in the structure of NAICS, five sectors are largel y goods-producing and fifteen are entirely services-
producing industries.
11 Agriculture, Forestry, Fishing and Hunting
21 Mining and Oil and Gas Extraction
22 Utilities
23 Construction
31-33 Manufacturing41 Wholesale Trade
44-45 Retail Trade
48-49 Transportation and Warehousing
51 Information and Cultural Industries
52 Finance and Insurance53 Real Estate and Rental and Leasing
54 Professional, Scientific and Technical Services
55 Management of Companies and Enterprises
56 Administrative and Support, Waste Management and Remediation Services
61 Educational Services
62 Health Care and Social Assistance
71 Arts, Entertainment and Recreation72 Accommodation and Food Services
81 Other Services (except Public Administration)
91 Public Administration
__________