Statement of Mark Van Putten,
President and Chief Executive Officer,
National Wildlife Federation

Testimony Before the Subcommittee on Trade
of the House Committee on Ways and Means

Hearing on the United States Negotiating Objectives
for the WTO Seattle Ministerial Meeting

August 5, 1999

I am Mark Van Putten, President and CEO of the National Wildlife Federation, the United States' largest not-for-profit conservation education and advocacy organization with over four million members and supporters, ten field offices and forty-six state and territorial affiliates. For nearly ten years, our staff has been involved in the development of United States trade policy. Our members are America's mainstream and main street conservation activists who understand the link between sustainable economic development and environmental protection.

This hearing marks an important cross roads in American history. For years we have negotiated international trade and investment agreements as if they were independent from their impact on the wildlife and natural resources on which they often depend. We have assumed that "increased trade is always better," because we believed that more trade lead to greater wealth and an improvement in the quality of life for all people. To that end, United States trade policy has traditionally been dedicated to securing greater market access for United States' goods and services through the elimination of national policies of our trading partners that stood in the way of efforts to trade more and more products and services.

In many cases, increased trade is better, especially when we are talking about the needs of developing countries. Increased access to international markets allows developing countries to sell their goods and services to a growing global market. But as we better understand the impact living in a global society has on our efforts to protect the environment in a global society, we understand that liberalizing trade does not come without costs to the environment. We now understand that trade liberalization increases the pressure to turn wild spaces into farmland and, in a recent tragic example, can undermine efforts here at home to protect endangered sea turtles all over the world.

The National Wildlife Federation believes that it is time to change the scope and direction of United States trade policy. We need a policy that will promote healthy economies and cleaner environments. Acting as host to the World Trade Organization's Third Ministerial in November, we believe that the United States has an unprecedented opportunity to demonstrate its leadership on this important matter, and show the world that economically sound trade policy must respect the environment and, the communities affected by the trend toward globalization.

The WTO Ministerial represents a critical opportunity to review and reform the international trade regime so that it respects and promotes the core values of the American people. We stand prepared to assist Congress and the Administration in developing a negotiating agenda which fully incorporates environmental priorities within specific proposals for WTO rule reform and clarification. At the same time, we must respectfully acknowledge our willingness to oppose the next round of WTO negotiations if protection of the environment and democratic procedural reform of the WTO do not emerge as integral components of the future multilateral trading system.

We acknowledge and appreciate the progress made by the United States in addressing environmental concerns at the WTO High Level Symposium on Trade and Environment in March 1999 and in the United States proposals for the Seattle Ministerial agenda presented before the WTO General Council in July 1999. We welcome the Administration's attempts to improve transparency and participation of civil society at the WTO and, to encourage the elimination of environmentally-damaging subsidies in the fisheries sector. We are also moderately encouraged that the WTO dispute settlement panel jurisprudence and, in particular, the Appellate Body rulings, have recently demonstrated an improved sensitivity to the merits of environmental policy.

Despite the important United States proposals, we must reiterate our view that the positions articulated by the Administration as part of its Seattle Ministerial agenda are positive first steps. Clearly, the choice between awaiting improved jurisprudence and pursuing concrete rule reform is not necessarily an "either/or" proposition. If the widespread support of NWF members and the American people for further trade liberalization is to be achieved, United States leadership and more progress needs to be made in implementing the proposed initiatives and in clarifying and modifying the current trade rules to adequately reflect the integration of environmental concerns.

I.ñ THE RELATIONSHIP BETWEEN THE INTERNATIONAL TRADE REGIME AND ññ ENVIRONMENTAL POLICY

A. Background --- The Principles of the GATT/WTO Regime

The core principles of the General Agreement on Tariffs and Trade (GATT 1947)(1) and its recent successor, the World Trade Organization (WTO),(2)have important implications for environmental protection. Generally speaking, WTO rights and obligations impose certain disciplines on its signatory parties --- or member nations. The following principles represent GATT's core disciplines:

Article I of the 1947 original GATT text establishes the Most-Favored-Nation principle (MFN). MFN aims to ensure that each member nation grant any privilege or advantage it provides to a product from one member immediately and unconditionally to "like products" from, or destined for, all WTO members. MFN effectively requires all member nations to treat products from all other WTO members in the same manner.

Article III establishes the National Treatment Principle, which requires members to treat any imported "like product" in the same manner as they would treat domestic "like products". GATT/WTO dispute settlement panels have traditionally defined the term "like product" narrowly so as to prohibit distinctions in products based on the manner in which they were produced, or process and production methods (PPM). At its core, National Treatment is designed to prevent the discrimination of imported products in favor of domestic products.

Article XI establishes a prohibition on quantitative restrictions and seeks to prohibit such trade actions as quotas, embargoes, and licensing schemes on imported or exported products.

A WTO member country challenged with violating any of the above obligations has recourse to the GATT 1947 General Exceptions. Article XX(b) and (g) are the exceptions most frequently cited in trade disputes that involve the environment and natural resources.(3)

Article XX also allows exceptions from the WTO general obligations to, inter alia, protect public morals, distinguish products manufactured with prison labor, exclude commodity agreements that meet certain criteria, and meet emergency shortages of supplies.

Thus, if the trade provisions of a WTO member's environmental policy are challenged as a violation of its WTO obligations, the defendant country may attempt to justify the measure as "necessary to protect human, animal or plant life or health" (Article XX(b)) or, "relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption." (Article XX(g)).

In addition to Article XX, the nexus between trade and the environment is frequently addressed within the context of the WTO Agreements on Technical Barriers to Trade (TBT Agreement) and the Sanitary and Phytosanitary Agreement (SPS Agreement).

The TBT Agreement seeks to ensure that the nondiscrimination and national treatment provisions of the WTO as a whole are specifically applied to the adoption of technical regulations by members.(4) The TBT Agreement emphasizes deference to international standards in the creation of regulations governing, among others, product characteristics, process and production methods, labeling, and packaging.(5)

The WTO SPS Agreement attempts to prevent non-tariff barriers to trade in the form of environment and health measures designed "to protect animal or plant life or health within the territory of the Member" through restrictions on invasive species, additives, pesticides, and other contaminants. In similar fashion to the TBT Agreement, the SPS Agreement places additional disciplines on WTO members so as to ensure that measures are not to be "maintained without sufficient scientific evidence", nor be maintained "if there is another measure, reasonably available. . . that achieves the appropriate level of protection and is significantly less restrictive to trade."(6)

If a dispute arises, a complaining party may request the appointment of a dispute panel to settle the disagreement. The panel hearings are between governments and are generally closed to the public and non-governmental organizations (NGOs). Panel reports are adopted within sixty days of their issuance unless a member initiates an appeal or it is the consensus of the other members not to adopt the report. If a member chooses to ignore the recommendations of a panel, the complaining member may seek compensation in the area of trade directly related to the dispute or, if necessary may cross-retaliate in another trade sector. As a result, a member country whose environmental regulation is found by a WTO dispute settlement panel to be inconsistent with WTO obligations is immediately susceptible to significant pressure to either alter the environmental law in domestic administrative processes or provide compensation to the complaining WTO member.

B. Implications for National and International Environmental Policy

The GATT/WTO trade principles have direct implications for a host of environmental laws. Any national or multilateral environmental measures attempting to accomplish their environmental objective that results in the application of trade restrictions with disproportionate impacts on different WTO members runs the risk of being in violation of the MFN principle. The trade provisions of a multilateral environmental agreement (MEA), the Montreal Protocol on Substances the Deplete the Ozone Layer, that promote different trade restrictions among WTO members based on their status as parties or non-parties to the Protocol may violate the MFN principle. Similarly, an environmental measure that attempts to distinguish products based on the environmental consequences of their production (e.g. tuna caught in a manner that harms dolphins as opposed to tuna caught without producing dolphin mortality) may violate the national treatment principle. Finally, if an environmental regulation restricts the trade in a particular product via a trade ban, the regulation in question may be declared inconsistent with Article XI's prohibition on quantitative restrictions. For example, the United States' trade restrictions on shrimp products caught in a manner that harms sea turtles were recently found to be in violation of Article XI by a WTO dispute settlement panel.

In addition to the core principles, WTO members are increasingly demonstrating a propensity to utilize the TBT and SPS Agreements to impose additional disciplines on national and international environmental policies. For example, WTO members continue to explore measures designed to discipline voluntary environmental labeling and certification programs by advocating not only adherence to the TBT Agreement but, also a list of additional principles requiring ecolabeling programs to be, inter alia, "based on sound science" and "no more trade restrictive than necessary".(7) Ecolabeling proponents remain concerned that the new disciplines inherent in the recent proposals and the principles of the TBT Agreement go well-beyond the requirements of MFN and national treatment obligations and may place WTO dispute settlement panels in the position of interpreting the substantive merits of individual and voluntary environmental labeling programs.

Similarly, the SPS Agreement requires national environmental measures to adhere to additional trade-based disciplines and allows significant deference to international standards. As a result, many national environmental and health authorities remain concerned that the SPS Agreement will allow WTO dispute settlement panels to sit in judgment of societal policy choices such as determinations relating to appropriate levels of risk and/or may defer to occasionally weaker international standards in the interest of promoting trade.

As noted earlier, when differences of opinion over national policy and its relationship to trade rules arise, member nations seek a resolution via the new dispute settlement system established in conjunction with the WTO. Thanks in large part to United States leadership in the post-WW II era, the use of tariffs to impede the flow of goods around the world has diminished considerably. As a by-product of this success in tariff reduction, the WTO dispute settlement system has increasingly been called upon to confront the trade-distorting effects of non-tariff barriers. Within the international trade regime, domestic and international environmental regulation is often suspected, rightly or wrongly, of rising to the level of an actionable non-tariff barrier to trade.

The WTO Dispute Settlement Understanding encourages members to enter into informal negotiations in an effort to reach a mutually agreed solution.(8) If a resolution of the matter is not forthcoming, a challenging member invoking the dispute settlement procedures is entitled to a prima facie assumption that the trade provisions of the environmental measure being challenged are inconsistent with the WTO rules. The burden of proof to rebut the charge is on the defendant member seeking to implement the environmental regulation.

In response to the preceding trade and environment linkages and in the interest of forging a new consensus on United States trade policy as we work together to develop United States negotiating objectives for Seattle, the National Wildlife Federation proffers the following recommendations as potential objectives for future United States trade initiatives.

II. ESTABLISH APPROPRIATE AND REASONABLE LIMITS TO THE WTO's INFLUENCE ON LEGITIMATE NATIONAL AND INTERNATIONAL ENVIRONMENTAL MEASURES

A. Improve WTO Deference to National Standards and Multilateral Environmental Agreements (MEAs)

Trade rules must be crafted so they do not diminish the environmental protections that nations have provided for their citizens and their natural resources. As trade negotiations and trade institutions are increasingly faced with the challenge of distinguishing national standards adopted for legitimate health and environmental purposes from those regulatory standards enacted with protectionist intent, the need to ensure appropriate deference to national decisionmakers with environmental expertise acting at the behest of their citizens intensifies.

As the recent WTO dispute settlement panel opinion regarding the United States' efforts to protect endangered sea turtles and several other environmentally-related dispute settlement decisions attest, the WTO's review of the trade-related aspects of environmental policy tends to expand rapidly into a substantive review, from a trade perspective, of the overall effectiveness of a chosen environmental policy.(9)

In addition to endangered sea turtle regulations, the WTO and GATT dispute settlement bodies have recently issued rulings on domestic laws addressing appropriate levels of protection for growth hormones in beef(10) , air quality(11), and fuel efficiency standards.(12)

1. Sanitary and Phytosanitary Measures

WTO SPS negotiators are charged with the difficult responsibility and challenge of balancing the right of domestic regulatory authorities to determine their appropriate level of risk and the obligation to maintain measures consistent with their commitments under the WTO SPS Agreement. The next level of SPS negotiations at Seattle and beyond represent a significant opportunity for the United States and its fellow WTO partners to absorb the lessons of existing SPS Agreements in the NAFTA and Uruguay Round/WTO contexts and to create a much-improved agreement that ensures high levels of environment and health protection while facilitating trade.

A failure to seize this opportunity to establish a well-functioning SPS Agreement will undoubtedly lead to increased challenges to nondiscriminatory national environment and health protection laws which will in turn result in increased tension and instability in the international trading regime and an erosion of popular support within WTO countries for the WTO process. Accordingly, we recommend that the WTO negotiators seek to achieve an SPS Agreement consistent with the following principles:

Burden of Proof. The WTO SPS Agreement should explicitly place the burden of proof in establishing a violation of the SPS Agreement on the challenging party throughout the length of a dispute involving a particular country's environment and health protection measure;

International Standards as Minimum Levels of Protection and the Precautionary Principle. The WTO SPS Agreement should explicitly confirm that international standards are not to be considered maximum levels of protection in situations where a WTO country seeks to maintain a higher standard than an international standard.

As a result, SPS Agreement negotiators should insist that, at minimum, an express statement acknowledging that international standards may not be invoked to weaken higher domestic standards should be inserted into the SPS text. If modest deference to international standards is to be maintained, deference to relevant international health and environmental standards and appropriate multilateral environmental agreements (MEAs) should be incorporated into the SPS Agreement. Indeed, the SPS Agreement should expressly acknowledge the right of WTO members to invoke the Precautionary Principle (the right to take action against a potential harm even if the scientific evidence linking an activity to the harm in question is inconclusive or uncertain) in determining their appropriate levels of risk.

Deference to National Regulatory Authorities. The WTO SPS Agreement must allow for deference to national regulatory authorities in the assessment of risk and the determination of the appropriate level of SPS protection. As an appropriate starting point in considering modifications to the SPS Agreement, the United States should seek explicit language in the text of the WTO's Sanitary and Phytosanitary Agreement similar to the language contained in the Uruguay Round Statement of Administrative Action. The United States has stated that the SPS Agreement's definition of appropriate level of protection

explicitly affirms the right of each government to choose its levels of protection, including a "zero risk" level if it so chooses. A government may establish its level of protection by any means available under its law, including by referendum. In the end, the choice of the appropriate level of protection is a societal value judgment. The Agreement imposes no requirement to establish a scientific basis for the chosen level of protection because the choice is not a scientific judgment.(13)

In addition, trade rules must explicitly ensure that sovereign nations may continue to adopt and maintain legitimate, nondiscriminatory protective standards for health, safety, and the environment.(14) President Clinton has stated in an address marking the 50th Anniversary of the WTO "Enhanced trade can and should enhance -- not undercut -- the protection of the environment. [I]nternational trade rules must permit sovereign nations to exercise their right to set protective standards for health, safety and the environment and biodiversity. Nations have a right to pursue those protections --- even when they are stronger than international norms."

Accordingly, WTO negotiators should insist that an interpretative statement be incorporated into the SPS Agreement reflecting the above position so as to provide clear guidance to WTO dispute panels that any potential SPS Agreement requirement of scientific justification must not allow the substitution of a panel's scientific judgment for that of domestic regulatory authorities.

2. Allow Explicit Deference to Multilateral Environmental Agreements (MEAs)

The potential conflict between existing WTO trade rules and the use of trade measures in MEAs has to be addressed. MEAs use trade measures to promote environmental cooperation and enforcement through the use of a variety of positive and negative incentives related directly to the environmental problem at issue.(15) For example, MEAs utilize trade provisions to regulate the trade in a "target" product or substance primarily responsible for the environmental degradation -- such as ozone depleting chemicals or trade in animal parts derived from endangered species.

Frequently, many of the trade provisions in MEAs require MEA parties to restrict trade in an environmentally damaging product with non-parties to the MEA. Under these circumstances, a non-party to the MEA that is a WTO member may allege a violation of their WTO MFN rights and obligations as a result of the differential treatment. In addition, trade restrictions in MEAs that encourage wholesale bans or embargoes of products may also be deemed inconsistent with Article XI's prohibition on quantitative restrictions.

The National Wildlife Federation strongly supports global efforts to negotiate and implement MEAs. In general, MEAs encourage transparency and nondiscrimination, and simultaneously discourage alternative unilateral measures that may lead to further trade tensions. Traditionally, well-supported MEAs provide certainty for business and discourage "free-riders" from attaining competitive advantages over law abiding competitors. Negative economic consequences for products not related to the environmental harm at issue are rare and the WTO Secretariat has acknowledged that "none of the existing MEAs contain provisions for discriminatory trade measures to be taken against unrelated products in the case of non-participation or defection."(16)

The United States needs to demonstrate leadership in working with other WTO members, MEA parties, and the international environmental NGO community to establish a framework in which the laudable goals of trade liberalization and multilateral environmental protection may co-exist. We pledge to work with Congress and the Administration to:

      • Build on the NAFTA model. The United States' commitment to multilateral environmental solutions to international environmental issues as reflected in Article 104 of NAFTA made important strides towards increased deference for MEAs addressing shared international environmental issues such as the trade in endangered species, transboundary hazardous waste, and ozone depleting chemicals.(17) ñ We urge the United States to consider an expansion of the list of MEAs eligible to be "grandfathered" into existing trade agreements and to provide explicit guidance to WTO dispute settlement panels that trade rules should not inhibit the environmental objectives of MEAs;

      • Enhance WTO Deference to Legitimate MEAs. The United States should seek clarification of WTO rules to allow explicit deference to the independent institutions of established environmental expertise on questions of appropriate environmental policy in the global commons. For example, the WTO should establish a formal link to the United Nations Environment Programme (UNEP) as an appropriate venue for providing initial arbitration and expertise services to the WTO in the face of a dispute involving an MEA and WTO rules.

III. HARNESSING COMPETITIVE ENERGY TO WORK FOR THE ENVIRONMENT

Manufacturers tend to operate using a simple but powerful logic --- produce the highest quality product while minimizing costs and seeking to operate in a multilateral rules-based system that provides as much certainty and clarity in its applicable rules as possible. The vast majority of businesses abide by the existing rules and, seek competitive environments where they know their colleagues do the same. Regrettably, some businesses try to exploit loopholes in international trade and investment rules to cut costs and create competitive advantages. Trade rules that do not acknowledge limited distinctions in products based on the manner in which they are produced (PPMs) or fail to aggressively curtail the use of environmentally damaging subsidies perpetuate an uneven competitive playing field. From the perspective of law-abiding businesses, to ask producers, operating in compliance with domestic environmental laws, to compete against foreign-based companies that compete by polluting the environment or destroying natural resources is inadequate trade policy and is simply not fair.

Trade rules can be written in a way to encourage environmentally responsible behavior, and to prohibit businesses from exploiting the loop holes that exist in the current international trade framework.

The National Wildlife Federation recommends the following:

A. Address the Process and Production Methods (PPMs) Dilemma: To promote a competitive level playing field, Congress and the Administration should work diligently to adopt appropriate criteria to ensure that legitimate environmental policies regulating production process methods are preserved from challenge in a trade dispute. Initial criteria should allow WTO members to distinguish products based on the manner in which they are produced in limited and clearly defined environmentally-related circumstances. For example, distinctions in products made with environmentally adverse consequences for the global commons (e.g. products produced with ozone depleting substances) and in measures designed to protect threatened or endangered species should be deemed consistent with WTO rules.

B. Eliminate Environmentally Perverse Subsidies and Promote Trade in Environmental Technologies: Renewed attention and energy must be devoted to delivering eminently achievable "win-win" solutions in the trade and environment interface. For example, the elimination of perverse and environmentally damaging subsidies in natural resource sectors such as fisheries and forest products may result in positive gains for both the environment and trade. We commend the United States for its leadership in seeking enforcement of current WTO notification requirements and rules governing the elimination of subsidies in its 1999 WTO Ministerial negotiating agenda. In addition, the United States deserves credit for its efforts to place the facilitation of trade in environmental technologies on the Seattle Ministerial agenda. Admittedly, while the elimination of environmentally-damaging subsidies and improved trade in environmental clean technologies is not a panacea to the resolution of all trade and environment conflicts, progress in these areas does represent a positive step forward.

C. Conduct Environmental Assessments: A commitment to sustainability and access to information argue forcefully for the initiation of comprehensive environmental assessments of natural resource sector liberalizations in the early stages of the trade negotiating process and upon completion of trade negotiations. The United States should build on and strive to strengthen the positive experiences associated with environmental reviews prepared for NAFTA and the Uruguay Round Agreements establishing the WTO. In addition, the United States and our OECD trading partners have agreed that "governments should examine or review trade and environmental policies with potentially significant effects on the other policy area early in their development to assess the implications for the other policy area and to identify alternative policy options for addressing concerns."(18)

The National Wildlife Federation stands committed to working with members of the Committee and the Administration in developing specific and practical environmental assessment proposals. The goal of the assessment(s), and their open public review and comment process, should be to provide accurate information on the relative environmental impact of proposed liberalization in a variety of sectors under negotiation. In instances when a potential environmental harm is identified, the assessment should suggest mitigative measures such as staggered implementation schedules and/or technical assistance to lessen the impact on the environment.

D. Negotiate Environmentally Responsible Investment Agreements: Increased foreign investment built on a solid commitment to sustainable development can potentially lead to transfers of cleaner environmental technologies and improved capital expenditures in environmental protection infrastructure. At the same time, poorly crafted investment rules may exacerbate the exploitation of natural resources, contribute to environmental degradation and place downward pressure on national environmental laws and regulations through closed dispute settlement processes. As a result, NWF does not support the negotiation of investment rules beyond the current Agreement on Trade-Related Investment Measures (TRIMs) as part of the Seattle WTO Ministerial Agenda. The United States should maintain its current position of not seeking multilateral investment negotiations within the WTO. In the alternative, WTO investment negotiations should, at minimum, attempt to achieve the following:

Seek mandatory, enforceable measures in the trade agreement to prohibit the lowering of environmental standards to attract investment and an active monitoring system to ensure compliance;

Undertake a review of the traditional "investor-to-state" principle found in numerous bilateral investment agreements with an emphasis on its compatibility with procedural openness, transparency and environmental protection efforts. Recently, in the NAFTA context, several private investors have attempted to use the investor-to-state provisions to challenge domestic regulations with potentially detrimental consequences for environmental laws. Indeed, we understand the NAFTA parties are presently engaged in such a review and we urge close coordination with WTO negotiators in this process with increased attention devoted to ensuring greater safeguards for environment and public participation in a WTO investment framework;

WTO investment negotiations should include obligations allowing legitimate measures designed to conserve the environment, natural resources and the promotion of cooperative environmental programs to be maintained.

E. Slow Down Negotiation of the Forest Products Accelerated Tariff Liberalization (ATL) Initiative Pending the Conclusion of a Comprehensive Environmental Assessment. The United States has announced, as part of the Seattle Ministerial Agenda, its intention to pursue accelerated tariff liberalization ("zero for zero" reciprocal tariff elimination) in the, inter alia, forest products, fisheries' products, environmental goods, and chemicals sectors. In the forest products sector, the proposed joint USTR and CEQ "written analysis" of the forest products ATL presents a significant opportunity for the United States to pause and assess carefully and thoroughly the environmental impact of the current ATL initiative on global forests. We urge the United States to utilize this analysis to promote an open and frank discussion of the ATL initiative's direct effects on such factors as consumer demand and the efficient management of worldwide forest resources. Accordingly, we recommend that USTR and CEQ work diligently to ensure the ATL initiative properly addresses potential environmental concerns before proceeding at its current rate of negotiation and implementation.

An enhanced commitment to sustainable development will require a comprehensive assessment of the potential impacts on sustainability of the proposed forest sector liberalization. We wish to emphasize that NWF has not drawn any premature conclusions to the ensuing results of a thorough assessment. Clearly, some tariff liberalization will be beneficial to the environment while tariff liberalization in other areas may produce negative consequences for the environment.

The goal of the assessment should be to identify those liberalizations likely to be less-harmful and give them a higher priority than areas of liberalization identified as detrimental to the environment. In instances when an environmental harm is a likely outcome, longer implementation timetables, technical assistance, the establishment of preventive and mitigative measures, and proffering reasonable alternative actions may merit due consideration by policymakers. An environmental assessment will also strengthen public participation in trade negotiations by making the best use of NGO and other civil society inputs and experiences involving trade liberalization impacts in certain natural resource sectors.

In addition to an assessment of the "zero for zero" reciprocal tariff elimination approach, a comprehensive analysis of the forest products ATL should explore the potential impact of experimenting with other aspects of the traditional tariff system, including inter alia:

      • carefully amending the Harmonized Tariff System (HTS) to better reflect the sustainable harvesting of natural resource products. The HTS has the potential to act as an incentive to encourage the production of natural resource products in a sustainable fashion throughout the United States and the entire world;
      • promote increased flexibility in the tariff system to potentially allow for a zero-tariff model in certain categories of forest products (e.g. finished wood products), while maintaining capacity to continue moderate tariffs in other categories (e.g. raw, unprocessed logs or wood chips) if they were clearly shown to have adverse environmental and/or economic consequences.

IV. SUPPORT COOPERATION ON ENVIRONMENTAL MATTERS AMONG TRADING NATIONS

As trade liberalization leads to increased market integration, the opportunities to foster a meaningful cooperative environmental agenda through parallel environmental institutions multiply. Our own experience working with government officials in Latin America and elsewhere has helped us understand that it is not improvements in environmental protection per se that governments are reluctant to pursue. On the contrary, most government officials are trying hard to develop and implement effective national environmental regimes. What concerns them are two factors:

      • In the past, some governments have regarded a number of environmental laws and regulations as thinly guised protectionism. We recognize improperly crafted environmental policies can lead to unnecessary trade tensions;
      • The fear that, above and beyond trade agreement commitments, they lack the political will and/or technical resources to fully implement their own environmental laws and regulations.

A. Promote Environmental Cooperation:

The National Wildlife Federation supports the notion that trade and investment agreements create unique opportunities to further environmental cooperation among our trading partners that should not be ignored. The conceptual framework and cooperative mission of parallel environmental institutions associated with trade liberalization merits strong political and technical support in all of the United States' trade initiatives.

In the NAFTA context, the Commission for Environmental Cooperation (CEC) is the trinational environmental institution created by the North American Agreement on Environmental Cooperation (NAAEC) (NAFTA's "Environmental Side Agreement") to address continental environmental issues in the United States, Canada, and Mexico. The CEC attempts to facilitate cooperation and public participation among the NAFTA parties by addressing regional environmental concerns, helping to prevent potential trade and environmental conflicts, and promoting effective environmental enforcement in each of the NAFTA countries. To date, the CEC has been particularly effective in encouraging improved working relationships between the environmental ministers of the NAFTA parties, while at the same time, providing a valuable forum to address transboundary issues of shared environmental concern in North America.

The Border Environmental Cooperation Commission (BECC) is the certifying entity responsible for developing and evaluating border water, wastewater, and municipal solid waste (MSW) projects. BECC has comprehensive criteria to which projects must adhere in order to be considered for BECC certification. These include a project's economic viability and its sustainable development components. The NADBank, now fully funded with $450 million in equal contributions from the United States and Mexico, is a binational financial institution that may use its funds to leverage additional capital but only for those projects certified by the BECC.(19)

The BECC/NADBank have been particularly effective in facilitating the development and adoption of sustainability criteria used to evaluate potential environmental infrastructure projects; transparent decision-making processes with public participation from both nations; and capacity building and technical assistance. Despite this progress, several issues which are beyond the scope of this hearing remain a concern for some border communities seeking environmental infrastructure funding, including: interest rates on loans are too high for some communities, particularly in Mexico; without a fee-based utility system, Mexican municipalities must pioneer rate structures and fee collection; border population growth rates have increased rapidly as project development has lagged behind.

V. TRADE NEGOTIATIONS AND TRADE INSTITUTIONS MUST BECOME MORE OPEN AND TRANSPARENT

As trade negotiations and trade institutions increasingly establish the terms of market integration and their attendant impacts on the environment, the need for meaningful public participation opportunities correspondingly increases. Public participation should be integral to any trade or investment negotiations. Such a linkage confirms the relationship between open markets and democratic principles, and provides citizens with the information they need to make sound and informed choices about policies that affect their future.

The United States has adopted a very positive approach to improving access to WTO decision makers and, ensuring that people are able to hold the WTO accountable for its actions. The National Wildlife Federation urges Congress to support this effort to infuse the WTO with the same democratic rules of accountability enjoyed by American citizens.

The National Wildlife Federation recommends:

A. Reform WTO Procedures Regarding Transparency and Participation to Ensure the WTO System Is Held Accountable to Democratic Principles: While the United States is to be commended for its efforts over the past two years to increase public participation and transparency in several trade negotiating fora, including as part of the Administration's Seattle Ministerial agenda, further progress is within reach. For example, the United States must work diligently to increase transparency in individual sectoral WTO negotiating groups in which the United States actively participates. In the context of the Seattle Ministerial agenda, the recently proposed rebirth of the Committee on Trade and Environment (CTE), ostensibly created as a forum to identify and discuss the environmental implications of issues under negotiation in a new round, must not simply become a "mailbox" repository of NGO issues with no significant corresponding influence, nor impact on the negotiating process. Clearly, the CTE's work program must avoid repeating its previous mistakes of conducting a one-sided and imbalanced review of the trade implications of environmental policy without addressing adequately the impact of trade policy on environmental measures. In addition to any proposed new role for the CTE, the WTO should establish, as a general matter, information disclosure policies and clear mechanisms for receiving and responding to NGO participation and comments.

Improved access and accountability are especially important for people from developing countries, many of whose governments do not have permanent missions located in Geneva. Given the informal nature by which the WTO makes its decisions at present, ensuring that the interests of all people are represented at the WTO must be integral to the United States objectives for trade liberalization. For most of the world's population, the incredible acceleration of the global economy has also brought accelerated loss of wildlife and wild places. We urge the United States to devote its energy to ensuring that all future WTO procedures are open and accessible to all people.

Finally, in the interests of promoting a more open and equitable procedure for establishing and negotiating trade and investment agreements, the National Wildlife Federation has co-authored a White Paper which proposes a new form of trade negotiating authority.(20) We believe that the ideas represented in this White Paper will stimulate a public debate on how best to empower the United States government to bring home trade agreements that promote healthy economies and cleaner environments.

B. Open the Dispute Resolution Process: In all trade regime dispute settlement fora, the United States should, at minimum, fulfill President Clinton's commitment at the WTO to open dispute settlement proceedings to public observation and pursue mandatory consideration of amicus briefs from interested NGO parties.

Conclusion

Thank you again for the opportunity to present these views. Let me conclude by saying that, for the members of the National Wildlife Federation, the question is not whether to trade, but under what rules do trade and investment serve to promote a healthier environment. Trade is a tool to achieve human aspirations, to improve standards of living, to enhance the quality of life. Our environment, our wild places and wild things are part of humanity's quality of life. Diminish them and you diminish the human standard of living. Trade rules are self-defeating if they force us to trade away those things we value most highly -- the clean air, the clean water, the open and living places that give quality to life. Trade should be an investment in a better way of life, not a license to degrade those things on which a healthy life depends. Unless WTO member nations embrace the agenda for WTO reform proposed by environmental organizations throughout the world, we believe that they will not earn the support they need to negotiate agreements that help to convince people that trade liberalization works for them.

Notes

1. General Agreement on Tariffs and Trade, Oct. 30 1947, 61 Stat. A3, 55 U.N.T.S. 187 [hereinafter GATT 1947].

2. General Agreement on Tariffs and Trade - Multilateral Trade Negotiations (The Uruguay Round): Final Act Embodying the Results of the Uruguay Round of Trade Negotiations, Dec. 15, 1993, Multilateral Trade Negotiations (The Uruguay Round) Doc. MTN/FA, 33 I.L.M. 1 (1994) [hereinafter WTO Final Act].

3. WTO Final Act, Article XX(b), Article XX(g)

4. Agreement on Technical Barriers to Trade, GATT/WTO (1994). A technical regulation is defined as:

Document which lays down product characteristics or their related processes and production methods, including the applicable administrative provisions, with which compliance is not mandatory. It may also include or deal exclusively with terminology, symbols, packaging, marking or labelling requirements as they apply to a product, process or production method.

5. TBT Agreement, Article 2.

6. SPS Agreement, Article 3:2 (para. 6).

7. See, e.g., Trade and Environment Bulletin, Committee on Trade and Environment (CTE), WTO, Press/TE 023, (May 14, 1998).

8. Understanding on Rules and Procedures Governing the Settlement of Disputes, WTO (1994).

9. See United States - Import Prohibition of Certain Shrimp and Shrimp Products, Final Report, WTO, WT/DS58/R, (April 6, 1998). See also, United States - Restrictions on Imports of Tuna, GATT Doc. DS29/R (June 1994) (unadopted); United States -- Restrictions on Imports of Tuna, GATT Doc. DS21/R (Sept. 3, 1991) (unadopted), 30 I.L.M. 1594 (1991); Canada -- Measures Affecting Exports of Unprocessed Herring and Salmon, GATT Doc. L/6268, GATT BISD 98 (35th Supp. 1988).

10. EC Measures Concerning Meat and Meat Products (Hormones), Final Report, WTO, WT/DS48/AB/R, (January 16, 1998).

11. United States- Standards for Reformulated and Conventional Gasoline (AB-1996-1), (March 4, 1996).

12. United States - Taxes on Automobiles, GATT Doc. DS 31/R, at 3-4 (Sept. 29, 1994) (unadopted)

13. The Uruguay Round Agreements Act, Statement of Administrative Action at 89.

14. Address By President Clinton to the World Trade Organization, Geneva, Switzerland, May 18, 1998.

15. See generally, General Agreement on Tariffs and Trade, Trade and the Environment (Feb. 12, 1992), 30.

16. Id.

17. North American Free Trade Agreement (NAFTA), Dec. 17, 1992, Can.-Mex.-U.S., 32 I.L.M. 296 and 32 I.L.M. 605.

Article 104: Relation to Environmental and Conservation Agreements

1. In the event of any inconsistency between this Agreement and the specific trade obligations set out in:
a) the Convention on International Trade in Endangered Species of Wild Fauna and Flora, done at Washington, March 3, 1973, as amended June 22, 1979,
b) the Montreal Protocol on Substances that Deplete the Ozone Layer, done at Montreal, September 16, 1987, as amended June 29, 1990,
c) the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal, done at Basel, March 22, 1989, on its entry into force for Canada, Mexico and the United States, or
d) the agreements set out in Annex 104.1, such obligations shall prevail to the extent of the inconsistency, provided that where a Party has a choice among equally effective and reasonably available means of complying with such obligations, the Party chooses the alternative that is the least inconsistent with the other provisions of this Agreement.

2. The Parties may agree in writing to modify Annex 104.1 to include any amendment to an agreement referred to in paragraph 1, and any other environmental or conservation agreement.

18. OECD Guidelines on Integrating Trade and Environment Policy, OECD, OCDE/GD(93)99 , para. A, B, (June 1993).

19. Since its inception in 1994, the BECC has certified 26 water and wastewater projects to date, with 14 projects in U.S. and 12 projects in Mexico. Of those projects, the NADBank has closed financing packages on six projects and has made recommendations for financing on another 8 projects. Total NADBank financial commitment is $408.4 million (U.S.). Although few in number, these projects represent an exponential increase in water and wastewater system construction in the border region, particularly on the Mexican side.

20. Sierra Club and the National Wildlife Federation, White Paper on Alternative Trade Negotiating Authority.

Center for International Environmental Law, National Wildlife Federation
Sierra Club, World Wildlife Fund, Friends of the Earth
Natural Resources Defense Council, Greenpeace USA
Defenders of Wildlife, American Lands Alliance, Consumer's Choice Council
Earthjustice Legal Defense Fund, Pacific Environment and Resources Center
Community Nutrition Institute, Institute for Agriculture and Trade Policy

July 16, 1999

Ambassador Susan G. Esserman
Deputy United States Trade Representative
600 17th Street, N.W.
Washington, D.C. 20508

Peter D. Robertson
Acting Deputy Administrator
United States Environmental Protection Agency
401 M. Street, S.W.
Washington, D.C. 20460

Dear Ambassador Esserman and Mr. Robertson:

Our organizations are deeply concerned about the Administration's development of positions for the Third Ministerial Conference of the World Trade Organization scheduled for Seattle this fall. WTO rules and procedures have been used repeatedly to attack environmental laws that our organizations have worked for decades to create, strengthen and protect. Equally important, the continued pressure to expand trade through broadened and intensified application of trade policy, without an equal effort to ensure that the right framework of environmental law and policy are in place, threatens to impede the conservation of our natural resources and the maintenance and improvement of a healthy environment. Yet while the Administration has sometimes raised general environmental concerns about trade and trade rules at the WTO -- most recently at the March 1999 high level symposium on trade and environment in Geneva -- it has failed to take the concrete actions needed to address those concerns effectively.

As our groups have emphasized in past communications, the Administration can fulfill President Clinton's pledge to put a "human face" on the global economy only if it combines its commitment to liberalizing trade with an equally strong commitment to environmental protection and sustainable development. We appreciate the Administration's call to improve public distribution of WTO documents, enhance public participation in WTO dispute settlement proceedings, and encourage reduction of fisheries subsidies that distort trade and encourage overfishing. These efforts fall far short, however, of the comprehensive reforms needed to ensure that the world trading system does not hinder sustainable development and environmental protection. For example, we have found unacceptable the Administration's inflexible position in recent months that no textual changes to the WTO Agreements are needed, as it indicates a reluctance to deal seriously with environmental concerns.

The WTO Ministerial Conference offers an historic opportunity for the Administration to lead the review and reform that the international trade regime needs so that it will promote, rather than undermine, environmental protection and other core values of United States citizens. We stand prepared to help the Administration seize this opportunity by developing an agenda that fully recognizes environmental priorities. If, however, the Administration misses the chance to put the WTO on a course toward sustainable development, this will undermine support for subsequent negotiations at the WTO -- and for United States government authority to participate in those negotiations -- and invite united environmental opposition to the results. To avoid this, the Administration must develop an environmentally beneficial agenda for the Ministerial Conference, and a comprehensive plan for environmental review and reform of the WTO, that go well beyond the proposals advanced to date.

We recognize that the trade and environment issues confronting the WTO will not be resolved at a single ministerial meeting. What we do expect, however, is that the Administration formulate a plan for achieving solutions, and that it demonstrate a commitment to that plan through constructive, open engagement with the public, with Congress, and relevant agencies. Despite the complexity of the details, the outline of the plan we need to see has three simple themes, described below. Although not every one of our organizations endorses every detail in this letter or the accompanying attachment, we are united in support of the overarching principles expressed here. We will evaluate the outcome in Seattle on this basis.

1. Stop WTO Expansion. The Administration must avoid rushing into more negotiations on liberalization that would place the environment and environmental laws further at risk. In light of the potential for significant environmental impacts, this is not the time to embark on further expansion of the WTO's power or the scope of its rules. Thus, we oppose the launch of negotiations within the WTO on investment liberalization, government procurement or "early harvest" of tariff reductions.

We oppose accelerated tariff reduction and other liberalization in selected sectors pending an open, participatory and balanced assessment that includes formulation of mitigating measures. Our concern is intensified with respect to environmentally sensitive natural resource sectors, such as forest and fish products. Forests and fisheries are in crisis both nationally and globally. Prioritizing liberalization in these sectors is reckless, when we know that regulations and incentives for sustainable harvesting and commerce are grossly inadequate around the world.

Multilateral investment rules beyond the current Agreement on Trade-Related Investment Measures (TRIMs) should not be the subject of negotiations at the WTO. We are concerned that the United States government may be shifting its position to support partial negotiations on investment under WTO auspices.

2. Reform WTO Rules and Procedures. The WTO as it exists today urgently needs reform. The Administration must secure commitment to the reforms needed to ensure that existing WTO procedures and rules affirm, rather than hinder, environmental protection.

In broad terms, the WTO's limits of jurisdiction need to be defined more clearly, so that the WTO stays within its recognized realm of trade policy, and does not stray into the field of environmental regulation. Equally important, the WTO's decision-making must be transparent and must involve public scrutiny and input. Achieving these goals will require major changes in both the rules and the procedures for formulating, interpreting, applying and enforcing those rules. These changes must also be reflected in any negotiations that are launched in Seattle.

Substantively, both existing and future WTO rules must be written and interpreted so that they accord proper deference to national and international standards that serve legitimate environmental objectives. Procedurally, the terms of reference of each WTO working group or institutionalized body must provide for consideration of significant impacts on environment and sustainable development, and there must be mechanisms to ensure compliance.

3. Assess Impacts. The Administration must provide for an assessment of the environmental impacts of proposed multilateral trade and trade policy. The fundamental question is whether the framework of laws, policies and institutions is in place to ensure that additional multilateral steps to liberalize trade will lead to environmentally and socially beneficial outcomes. If not, then the assessment must formulate needed institutional, legal and policy changes before moving forward with further talks on liberalization.

This assessment process must begin immediately. It must be open and transparent, global in scope, and conducted through a balanced, impartial process. It should be carried out in cooperation with our trading partners. A forward-looking review must be complemented by a retrospective review of past and current impacts of existing policy. The reference point for the assessment must be the procedures and criteria developed under the National Environmental Policy Act.

The statement attached to this letter provides further details on our organizations' bases for our positions and our suggestions for addressing these areas of concern. We appreciate recent overtures from the Administration that indicate openness to a more substantive dialogue, and look forward to the chance to discuss our positions further with you and your staff.

Sincerely yours,

David R. Downes, Center for International Environmental Law

On behalf of:
Jake Caldwell, National Wildlife Federation
Dan Seligman, Sierra Club
David Schorr, World Wildlife Fund
Andrea Durbin, Friends of the Earth
Justin Ward, Natural Resources Defense Council
Scott Paul, Greenpeace USA
Rina Rodriguez, Defenders of Wildlife and Community Nutrition Institute
Antonia Juhasz, American Lands Alliance
Cameron Griffith, Consumer's Choice Council
Martin Wagner, Earthjustice Legal Defense Fund
Kristin Dawkins, Institute for Agriculture and Trade Policy
Doug Norlen, Pacific Environment and Resources Center

cc: Ambassador Stuart Eizenstat, Under Secretary for Economic and Business Affairs, Department of State
Frank E. Loy, Under Secretary for Global Affairs, Department of State
George T. Frampton, Jr., Acting Chair, Council for Environmental Quality
Frederick Montgomery, Assistant US Trade Representative for Policy Coordination, Chairman of Interagency Trade Policy Staff Committee

Attachment

Attachment

Center for International Environmental Law, National Wildlife Federation
Sierra Club, World Wildlife Fund, Friends of the Earth, Natural Resources Defense Council, Greenpeace USA,
Defenders of Wildlife, American Lands Alliance, Consumer's Choice Council,
Earthjustice Legal Defense Fund, Pacific Environment and Resources Center, Community Nutrition Institute
Institute for Agriculture and Trade Policy

The World Trade Organization and Environment

Technical Statement by United States Environmental Organizations

July 16, 1999

This statement provides further detail on the concerns and recommendations regarding environmental issues outlined in the July 16 letter from several United States environmental groups.(1) Part I details our opposition to further expansion of the World Trade Organization (WTO) at this time. Part II identifies specific reforms needed to WTO rules and procedures. Part III outlines procedural and substantive elements of the environmental assessment of existing and proposed multilateral trade agreements.

I. No WTO Expansion

The Administration must avoid rushing into more negotiations on liberalization that would place the environment and environmental laws further at risk. In light of the potential for significant environmental impacts, this is not the time to embark on further expansion of the WTO's power or the scope of its rules. Thus, we oppose the launch of negotiations within the WTO on investment liberalization, government procurement or accelerated sectoral liberalization, including "early harvest" of tariff reductions.

We oppose the Administration's effort to accelerate liberalization, especially in environmentally sensitive sectors such as forest products, in the absence of a careful and public assessment of the potential environmental impacts (see Part III.3 below). Aiming to reach agreement on further liberalization at the Seattle meeting itself -- as the Administration proposes to do with reduction of tariffs on forest products -- flies directly in the face of the Administration's commitment to review the environmental impacts of liberalization, because the schedule is too short to do a thorough assessment of effects and policy alternatives.

As we have repeatedly stated, multilateral investment rules beyond the current Agreement on Trade-Related Investment Measures (TRIMs) should not be the subject of negotiations at the WTO. Our objections to an investment agreement in the WTO go beyond the issues of establishing rights to sue for lost profits and investor-to-state dispute resolution. We are also concerned that enforceable rights to national treatment and most favored nation status could pry open environmentally sensitive sectors in markets where regulatory frameworks are inadequate to manage the increased environmental pressures that would result. If unaccompanied by strong frameworks of environmental and labor rights, application of the principles of national treatment and most favoured nation could also increase "industrial flight" by companies seeking to avoid costs of compliance with labor and environmental requirements.

In light of these objections, we are concerned that the Administration seems to be considering support for partial negotiations under WTO auspices. Prior to the negotiation of any investment rules in any forum, an over-arching international framework is needed to ensure that international investments promote sustainable development consistent with the needs of host countries and to guarantee that the environment is protected. The development of such a framework and any subsequent investment agreement should take place within the United Nations system. Any such agreement must include investor obligations with respect to environmental and community protection.

II. Reform WTO Rules and Procedures

In its Communiqué from Cologne in June, the G-8 stated that "environmental consideration should be taken fully into account in the upcoming round of WTO negotiations." We are pleased to hear the United States join other industrialized countries in this ambitious commitment. Unfortunately, the United States' proposals to date have been entirely inadequate to the task. To make significant progress, the Administration will need to make positive proposals on both substantive and procedural rules, including existing rules of the WTO as well as the terms of reference for any further negotiations launched at Seattle. The Administration will need to make a clear political statement that affirms environmental values and define a clear process involving the right mix of agencies and other partners for achieving progress on a range of issues.

Substantively, the Administration will need to take action to ensure that the scope of WTO rules is limited to trade policy and does not intrude into matters that come under environmental law and policy. WTO rules must provide for deference to international and national environmental standards (Part II.1), and protect the consumer's right to know (Part II.2). At the same time, WTO rules can and should be applied so that they encourage the elimination of environmentally damaging subsidies that also distort trade (Part II.3). Procedurally, the Administration must take steps to ensure that all WTO forums take environmental implications of their work into account (II.4), and that their operations become transparent and accountable (II.5).

1. WTO Deference To International And National Environmental
Standards And Institutions

WTO rules need to be reformed so that they stay within the bounds of trade policy and do not intrude into areas within the jurisdiction of environmental institutions and regulations. We are pleased to learn that the Administration now seems to agree that ad hoc dispute settlement decisions alone are not a solution to the impact that WTO rules as currently interpreted may have on measures to protect the environment. United States leadership of a multilateral approach to a number of issues is needed to ensure that WTO forums -- including the Dispute Settlement Body -- and WTO rules consistently defer to regulations and other measures adopted by international and national institutions, including measures based on the precautionary principle.

In the absence of such consistency, there is a serious risk that these institutions will be impeded from pursuing legitimate environmental objectives through negative interpretations advanced by trade policy-makers, ad hoc challenges, and the threat of adverse decisions in WTO dispute settlement. Of particular concern are the GATT, the TBT Agreement and the SPS Agreement; also relevant are the TRIPS Agreement as well as agreements on subsidies and agriculture.

Seattle is a critical opportunity for the United States to send a clear signal that trade policy must be developed and applied consistently with environmental principles, and to define a process and terms of reference for achieving agreement on how to ensure that WTO rules do not interfere with environmental measures. That process should aim at the following specific outcomes.

      1. Burden and Standard of Proof. Ensuring that the complaining party in a WTO dispute settlement proceeding has the burden to show the lack of an adequate basis for challenged local or national environmental and health regulations, and that WTO decision-makers employ a deferential standard of review, perhaps along the lines of Article 17.6 of the Anti-Dumping Agreement.
      2. SPS. Ensuring that the provisions of the SPS Agreement:

      1. Do not interfere with the right of national governments to develop and enforce high environment and health standards at the level they deem appropriate;
      2. Fully recognize the precautionary principle;
      3. Acknowledge clearly that international standards establish minimum, not maximum standards for the levels of environmental and health protection set by WTO Members.

      • Acknowledge Multilateral Environmental Agreements (MEAs) in WTO Rules. Consistent with the recent G-8 Cologne Communiqué, there must be an affirmation that trade-related environmental measures (TREMs) authorized or required under multilateral environmental agreements or internationally recognized environmental principles are consistent with WTO rules, including Article XX of the GATT, the TBT Agreement and the SPS Agreement. Criteria should be defined indicating to the WTO how to recognize the types of agreements or principles that fit within the MEA category. Contrary to USTR's suggestion in the July 2 briefing, the concept is not to establish criteria for evaluating whether an MEA measure is legitimate. Rather, such measures will be deemed legitimate by virtue of their adoption under an MEA.
      • Build Effectiveness of MEAs including Trade-Related Measures. The Administration needs to make it a positive priority to build effectiveness of MEAs. Where trade-related measures are appropriate means for addressing the environmental problem, the Administration should support their use. A WTO decision to defer to MEAs will do little good if MEAs are written to include "carve-outs" that ensure that WTO rules prevail over MEA obligations. Disputes over the implementation of MEAs should be resolved by MEAs, not by the WTO. Thus, we are also seeking a commitment from the Administration not to advocate the inclusion of "savings clauses" in future MEAs. The Administration should also work with other countries through appropriate environmental institutions such as the United Nations Environment Programme (UNEP) to develop principles of trade policy to which negotiators of MEAs can refer during negotiations.

      • Production or Processing Methods (PPMs). Ensuring that distinctions between products based upon PPMs related to environment, human rights and internationally recognized labor standards are recognized as legitimate measures for promoting sustainable commerce that are consistent with WTO rules.

      • Procurement. A clarification or amendment to the Agreement on Government Procurement ensuring that it recognizes the right of governments to use social and environmental criteria in making purchasing decisions. Several of our organizations provided further suggestions on this topic in comments submitted to USTR by the Consumer Choice Coalition in January.

      • UNEP and other Environmental Institutions. Adoption of cooperative agreements between WTO and international environmental institutions, including UNEP, by which the WTO defers to the role of appropriate institutions in addressing environmental aspects of international decision-making. Specifically, institutions such as UNEP and the secretariats of relevant MEAs should have a role in the settlement of environment-related disputes under the Dispute Settlement Understanding (DSU) as well as the definition of key international environmental principles such as the precautionary principle. Deference to such outside expertise is necessary in light of the specialized nature of WTO as a trade policy institution with trade expertise.

We will be happy to discuss the precise legal form that these steps might take at the appropriate time. For instance, a clarification could involve language in a statement adopted by a WTO Ministerial Conference or the WTO General Council, an agreed-upon interpretation formally adopted by the General Council, or an amendment to the text of the relevant agreement.

As a general matter, we would like to emphasize that the use of trade measures that affect developing countries to accomplish environmental goals should be accompanied by assistance to those countries to help them achieve those goals. This is consistent with the Rio bargain that developed countries would assist developing countries in raising environmental standards and combating environmental problems, so that all could share in sustainable development and an improved global environment. The merit of this approach was recognized in the Appellate Body's Shrimp/Turtle decision. Unfortunately, developed countries have failed to carry out their end of the bargain, with foreign assistance budgets declining, and debt relief proposals still inadequate. A renewed political commitment from the United States and other industrialized countries would contribute significantly to multilateral agreement on the program outlined here, and would offer long term payoffs for the United States economy and environment.

2. Protection of the Consumer's Right To Know

Markets can allocate resources properly only if consumers have the necessary information to make informed decisions. Unfortunately, some WTO Members -- including the United States government itself -- have advanced interpretations of WTO rules that threaten to restrict the power of governments and private organizations to provide consumers with information they want about the environmental and health aspects of products and their production. We urge the United States to work with other WTO Members to launch a process at Seattle that leads toward the following outcomes:

      1. Ensuring that the WTO Agreement on Technical Barriers to Trade (TBT) preserves the ability of governments and private organizations to protect the consumer's right-to-know and to promote sustainable consumption through open and transparent labeling programs, including genetically modified food;
      2. Ensuring that the TBT Agreement recognizes the legitimacy of regulations and standards that distinguish between products based on the environmental consequences of their manufacture, use and disposal; and
      3. Ensuring that the TBT rules do not conflict with speech protected under the U.S. Constitution, including third-party certified private labeling programs.

As with the proposals in Part II.1 above, we are open to further discussion about the precise legal form that these assurances should take. Generally, however, the principle is that the WTO must recognize that the TBT Agreement effectively includes an exception along the lines of Article XX, to the extent it applies to ecolabeling.

3. Eliminate Environmentally Damaging Subsidies

We welcome and support the Administration's willingness to push for the elimination of fishery subsidies that have contributed to the current global fisheries crisis. The Seattle ministerial should unambiguously place the fishery subsidies issue on the negotiating agenda, and should do so in the context of an open interdisciplinary and inter-organizational procedure that includes other institutions with relevant and needed expertise alongside the WTO. We urge the United States to push for a similar review of other environmentally damaging subsidies, such as those for forestry, fossil fuels and nuclear energy. At the same time, WTO Members must ensure that WTO rules allow governments to craft measures that reward the social and environmental values conferred by certain activities, such as adoption of environmentally responsible technologies, artisanal fishing and development of renewable sources of energy. The ability of the WTO to play a constructive role on subsidies will be a significant test of the organization's ability to produce the oft-promised "win-win" outcomes for trade and the environment.

4. Recognizing Environmental Aspects of WTO Decision-Making

Another key question is how to reform the procedures and institutions of the WTO so that decision-making takes into account its environmental implications. The United States proposes to use the Committee on Trade and Environment (CTE) on a "rolling basis" and in an advisory capacity to address the environmental aspects of WTO decisions. But compartmentalizing environment in the CTE has not worked in the past and will not work in the future. The Administration has offered no concrete steps that would effectively link the CTE to the real decision-making forums at the WTO.

In our view, much more is needed to ensure that the WTO takes environment into account in its decision-making. As a general matter, all relevant WTO bodies -- including councils, committees, and working groups -- must include reference to environmental protection and sustainable development among their objectives or terms of reference, consistent with the preamble of the WTO Agreement itself.

The WTO will also have to adopt procedures that ensure that these forums take these objectives seriously. For instance, each forum could periodically consult with international environmental institutions with relevant expertise, report on the environmental implications of their work, and make recommendations on how to address environmental impacts of the trade policies with which they are concerned. The CTE might have a role through review and comment on that report. Another option is for the WTO's Director General to present a review of the WTO's record on environment and sustainable development in a section of the annual report. The United States itself could do a better job of integrating environment by including representatives from relevant agencies such as the EPA on delegations when forums such as the SPS or TBT Committees discuss environment-related issues.

5. Improved Transparency, Public Participation And Accountability At The WTO

We very much appreciate the efforts made by the Administration to advance democratic reform of the WTO. We ask that the Administration continue to include increased transparency, participation and accountability as a priority on its negotiating agenda in Seattle. However, effective achievement in this area will require more actions in addition to broader and faster access to working documents and consideration of NGO submissions in dispute settlement. It will also require, at a minimum:

      1. opening of dispute settlement and appellate body proceedings to public observation;
      2. NGO participation in discussions of environment-related issues by other WTO decision-making forums, such as the SPS Committee, the TBT Committee, the TRIPS Council, the Agriculture Committee, the CTE, and relevant negotiating groups; and
      3. the development of a consultative process between the WTO, NGOs, member governments and businesses.

We recognize the validity of concerns raised by developing countries that they may have fewer resources than do some NGOs. The United States and other developed countries should support fuller participation by poorer WTO Members, for instance through financial and technical assistance.

A first step towards improved transparency of the WTO and trade policy must begin at home. We have indicated our willingness to work with the Administration to provide input into the negotiating agenda, yet little information and no documents have been shared with the NGO community as the Administration prepares its position for the WTO Ministerial. Only at the July 2 briefing did we hear any degree of detail about the Administration's proposed positions. We urge the Administration to be more transparent, to share information and documents, to engage the NGO community in a constructive dialogue, and to ensure balanced representation on advisory committees dealing with trade issues that have environmental implications consistent with the Federal Advisory Committee Act. Furthermore, we reiterate our request that the United States include NGOs on its delegation to the WTO Ministerial meeting, especially since other governments, such as Denmark, have already done so.

III. Environmental Assessments of Current and Proposed Trade Policies

We are pleased that President Clinton has committed the federal government to conducting an environmental review of the next round of talks at the WTO. However, the Administration needs to make significant progress in this area. We are concerned about the adequacy of the process and criteria for such an assessment. We believe that the assessment should include a review of both past and current impacts of existing trade policies on the environment and on environmental law and policy, a similar review of foreseeable impacts of proposals for negotiations, and consideration of policy alternatives. We remain very concerned about the conduct of assessments of proposed tariff reductions in environmentally sensitive sectors. Finally, we have concerns about certain process issues, including the roles of relevant agencies and cooperation with other governments.

1. Procedures and Criteria for Assessment

We are concerned that the Administration has yet to suggest any procedures or criteria for the assessment, with Seattle less than six months away. In our view, there are some clear principles with which this assessment must comply. Many of these principles are found in the National Environmental Policy Act (NEPA). The starting point for this assessment must be NEPA's mandated procedures and methodologies, as elaborated through regulations of the Council on Environmental Quality, and enriched through decades of federal agency experience with implementation.

At a minimum, the assessment must be comprehensive in scope, covering all Administration proposals for modifying or adding to existing trade policies embodied in the WTO Agreements. The assessment should be framed in terms of two basic questions. Is the framework of laws, policies and institutions in place to ensure that additional multilateral steps to liberalize trade will lead to environmentally and socially beneficial outcomes? If it is not, then what institutional, legal and policy changes must we make before we move forward with further liberalization?

The assessment must involve the full participation of civil society. In light of the short time remaining before Seattle, the assessment procedure must begin immediately. It must consider reasonably foreseeable impacts on a global scale. It must continue until the conclusion of any new negotiating round, taking into account new knowledge as it accumulates, as well as evolving trade policy positions. It must identify areas in which existing WTO agreements and new negotiations have (or will have) significant environmental effects, and evaluate policy alternatives and mitigation measures, including reforms of existing agreements and modifications of proposed ones including the no-action alternative. And it must integrate social and development concerns.

To ensure that the results are balanced and objective, the process should be overseen by the CEQ and conducted with the full and equal participation of affected federal agencies, state and local governments, and interested members of the public. Finally, we urge the Administration to take the lead in facilitating an assessment at the multilateral level by a balanced panel of experts drawn from the WTO Secretariat, international institutions with environmental and other relevant expertise, the scientific community, and the public.

2. Assessments of Existing Trade Policies

A forward-looking assessment must be complemented by consideration of lessons learned. To date, unfortunately, governmental consideration of environmental impacts of trade policy have been inadequate. As a result, we urgently need to gain a better understanding of the impacts of past trade policies. Thus, the Administration should also conduct an assessment of the environmental impacts of the WTO Agreements adopted in the Uruguay Round, carried out consistent with the principles we have outlined for conducting an assessment.

This review should cover all relevant WTO Agreements, such as the General Agreement on Tariffs and Trade (GATT), the Agreement on the Application of Sanitary and Phytosanitary Measures (SPS), the Agreement on Technical Barriers to Trade, the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), and agreements on subsidies and agriculture. In relation to the TRIPS Agreement, we are concerned that the expanded scope and enforcement of intellectual property rights required under the WTO TRIPS Agreement may affect the transfer of technology required under multilateral environmental agreements (MEAs), the rights of farmers and indigenous peoples, and the equitable distribution of benefits required under the Biodiversity Convention.

3. Assessment of Proposals for Accelerated Sectoral Liberalization

Beginning in the context of Asia-Pacific Economic Cooperation (APEC), and more recently in the WTO, the Administration has proposed accelerated reduction of tariffs, accompanied by examination of non-tariff measures, of a number of sectors, including environmentally sensitive sectors such as energy, chemicals, fish and forest products. In light of the potential environmental impacts, we urge the Administration to assess carefully the environmental effects of accelerated liberalization in all sectors, and to define and implement policy measures to maximize environmental benefits and mitigate harmful impacts. The United States should not push for accelerated liberalization until full environmental assessments have been conducted -- of the proposals for both tariff and non-tariff measures -- along the lines discussed in this letter. In light of the severe threats confronting forests and fisheries, and the demonstrably inadequate national and international frameworks for conserving them, this approach is particularly important with respect to the fish and forest product sectors.

We appreciate the step in the right direction represented by the joint analysis of the economic and environmental effects of the forest product initiative to be conducted by CEQ and USTR. We are skeptical, however, whether the review as defined in the June 25, 1999 Federal Register notice will be an adequate basis for sound policy making. Even if it is, we are equally concerned that the review's results will not be taken into account in the ultimate decision. Thus, we call on the Administration to explain on the record the environmental basis for whatever policy decision it takes. As currently proposed, the review does not reflect key principles of NEPA. For instance, the Federal Register notice allows only 30 days for the public to provide input, and it is unclear whether there will be any other opportunities for public participation.

4. Assessment of the Built-In Agenda

Services. We have concerns that negotiations on services could have some of the same far-reaching implications for domestic environmental and health regulation as would investment liberalization. Services, like investment, involve activities within a country's territory that relate to a host of regulatory functions performed by federal, state and local authorities. When it comes to trade liberalization, services, like investment, raise a host of concerns about community values, regulation and sovereignty that are not so directly posed by goods. We urge the Administration to assess environmental and social implications as it develops its positions.

Agriculture. The United States has called on WTO members to carry forward with agricultural negotiations with the objectives of gaining "further deep reductions in support and protection, while encouraging non-trade distorting approaches for supporting farmers and the rural sector." We share the Administration's desire to reform policies and programs that encourage environmentally damaging expansion and intensification of production. At the same time, government agricultural policy can and must reflect the multiple environmental and social functions that agriculture plays. Support for environmentally responsible agriculture can help level the playing field for farmers who take responsibility for the impacts that production has on the environment of their neighbors, and at the same time have to compete with producers that externalize environmental costs onto society. Government policy also should take into account the social values that independent farmers provide to communities.

We urge the Administration to make an effort to ensure that the United States approach to agriculture at the WTO strikes a better balance among these policy objectives than in the past. The United States continues to maintain direct and indirect subsidies and protections that distort agricultural markets and threaten our environment, such as below-market pricing for water from government-funded projects and for grazing on public lands. The Administration should carry out a thorough review and restructuring of these policies and programs.

The agricultural negotiations on the built-in agenda will offer governments a chance to develop a multilateral understanding of which policies and programs should be reduced, and which should be permitted, on environmental and social grounds. The assessment we are calling for will provide an opportunity for this. Governments should also explore how to help developing countries implement such support, whether through multilateral financial and technical assistance or through some system of preferences. We urge the Administration to provide leadership on the issue of food security in these talks. Governments must consider the impacts that dumping of food exports have on the productive capacity of countries whose populations suffer from chronic hunger, and take this into account in defining relevant trade policies.

* * * *

Submitted by:

David R. Downes

Stephen Porter, Center for International Environmental Law

On behalf of:

Jake Caldwell, National Wildlife Federation
Dan Seligman, Sierra Club
David Schorr, World Wildlife Fund
Andrea Durbin, Friends of the Earth
Justin Ward, Natural Resources Defense Council
Scott Paul, Greenpeace USA
Rina Rodriguez, Defenders of Wildlife and Community Nutrition Institute
Antonia Juhasz, American Lands Alliance
Cameron Griffith, Consumer's Choice Council
Martin Wagner, Earthjustice Legal Defense Fund
Kristin Dawkins, Institute for Agriculture and Trade Policy
Doug Norlen, Pacific Environment and Resources Center

1. Several of our groups have elaborated our concerns in detail in a October 16, 1998 response to the USTR's Federal Register request for input regarding US preparations for the Seattle ministerial, as well as in the Transatlantic Environmental Dialogue statement delivered to governments at the recent G-8 summit. The comments in this document are intended to summarize and complement these earlier statements and express the collective views of our respective organizations; however, not every signatory necessarily subscribes to the details of each formulation.

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