ed's website

(Source: here - a picture of the protests between November 29, 1999 and December 3, 1999 when the World Trade Organization (WTO) held its ministerial meeting in Seattle)

Below is my paper on the possibility of a Life Cycle Assessment (LCA) tax within the current World Trade Organization (WTO) framework (you can also read it as a Word Document or a pdf). The first section is semi-plagiarised from one of my other papers on 'The negative development impacts of a "food miles" approach to agriculture' (I had to write two extremely complicated 5000 word papers in one month and needed to self-plagiarise), but the rest is new. I ended up getting an A- grade for the paper. The comments that I received from the two professors who were marking it are at the bottom of the page.

If you really want to learn more about environmental regulation and the WTO then I'd suggest you read through Environment and Trade: A Guide to WTO Jurisprudence by Bernasconi-Osterwalder et al. The entire book is online or you can buy it here.

The book is very informative and through reading it I now understand the WTO to a degree I would never have been able to otherwise. This is especially the case because environmental groups often claim that environmental regulations can not be introduced because they would conflict with WTO rules. Reading through the book, and hopefully my essay below, will show you that this is often simply not true. While there are many problems with the WTO, there is some scope for environmental regulations within it.

Of course, to get some sort of balance, you should also have a read through Localization: A Global Manifesto by Colin Hines which will give you a completely different perspective on the WTO. Colin Hines is the inspiration for many of the Green Party's re-localisation policies (see, for example, the Green Party's policy on agriculture). Indeed, if you look at Green MEP Caroline Lucas's publication page, she has co-authored many reports with him. Another book on this side of the debate is Sustainable Agriculture and Food Security: The Impact of Globalisation which is edited by Vandana Shiva and Gitanjali Bedi. Shiva is another large inspiration for the relocalisation movement and tackles the WTO head on in this book and in others (see some notes from this book here).

Anyway, here is the paper. I'll let you make up your own mind!

by Edward Griffith-Jones

Introduction

The environmental debate surrounding the WTO has been highly polarised, with some – such as Colin Hine and Caroline Lucas - calling for the rules of the WTO to be rewritten to take more account of environmental issues (and other actors even calling for it to be abolished) to help prevent climate change, while others have called potential environmental regulations or a rewriting of the WTO a veil for “green protectionism”. This paper will explore the potential for a middle way which would not fall foul of current WTO rules and would try and incorporate the arguments made of environment regulation being used as veiled and arbitrary protectionism.

This middle way will look at the possibility of a WTO Member introducing an environmental Life Cycle Assessment tax (an assessment of the environmental effects a product or service has during its entire lifetime, from cradle to grave) on domestic and foreign agricultural products without coming into conflict with the WTO Articles of Agreement.

The paper begins by exploring the emission cuts needed to avert irreversible climate change and how much of a part agriculture has to play in this, then I move onto some of the arguments used by those who argue that the WTO rules need to be rewritten to help avert climate change and those who claim that this would lead to a vicious circle of protectionism. Finally, I detail how this middle way could be based on former WTO rulings before finishing on some questions which would need to be explored further before such a tax could be introduced..

For the first section, I focus on the UK governments’ climate change emissions targets because they reflect the cuts needed for most Northern countries if a contraction and convergence model is used. This is vital, because depending on how large the cuts are needed, different agricultural polices will be prescribed. Unfortunately, a detailed break down of the different projections is beyond the scope of this paper. Therefore, I summarise some of the arguments to give initial thoughts to these broad and complicated issues.

Climate Change

The UK government has stated that a 60% cut in emissions is needed to avoid a 2 degree Centigrade increase in temperatures by 2050 (DTI 2003). However, actors such as the Tyndall Centre believe that we should cut emissions by 90% by 2050 (under a contraction and convergence model) because "Carbon dioxide emissions have not fallen in the UK since 1990, despite Government claims to the contrary. The Government's figures have ignored emissions from international aviation and shipping." (Tyndall Centre 2006: 2). Others, such as George Monbiot and the Met Office, believe that Northern countries should reduce their emissions by 90% below 1990 levels by 2030 under a contraction and convergence model (see Monbiot 2006a 2006b and 2006c) because they believe the calculations are flawed in the Tyndall Centre report. Kevin Anderson, one of the Tyndall Centre Report authors, has responded to these accusations and the debate continues (Anderson 2006).

Many UK politicians have similarly supported the position of the Tyndall Report (House of Commons debate: 2006a, House of Commons debate: 2006b). There is increasing pressure to reduce carbon emissions beyond the 60 % advocated by the government and the current climate change bill. If a 90% reduction is demanded – whether by 2030 or 2050 – further drastic cuts will have to be made in all areas, including agriculture.

In May 2006, the Institute for Prospective Technological Studies (IPTS) and the European Science and Technology Observatory (ESTO) - together with the European Commission - released a report looking at the life cycle environmental impacts related to the final consumption of the EU-25. It concluded that:

“Food and drink cause 20 to 30% of the various environmental impacts of private consumption, and this increases to more than 50% for eutrophication. This includes the full food production and distribution chain ‘from farm to fork’.” (IPTS/ESTO 2006: 17).

The Commission, as well as many other actors, are looking to reduce the energy intensity of agricultural goods. Modern agriculture is not only vulnerable to climate change but it also a major cause of it, due to the emission of greenhouse gases and other damaging environmental impacts from animal rearing, fertiliser, pesticide and petrol use as well as many other factors.

Two alternative positions

Environmentalists such as Caroline Lucas, Michael Woodin and Colin Hine propose that the WTO should be completely reformed to promote a relocalisation of trade under a new General Agreement of Sustainable Trade (GAST) to help prevent climate change as well as achieving other objectives. (Woodin et al. 2004: 77-82, Hines 2001). This would entail a complete rewriting of the WTO.

The proposed GAST is based on a few fundamental provisions which are completely contrary, as we will see below, to the WTO Articles of Agreement. The key provisions are:

1) National Treatment: Trade will be encouraged but states are urged to give favourable treatment to domestic industry and services as well as being prohibited from treating foreign goods and services as favourably as domestic producers.

2) Most-Favoured Nation (MFN) Status: Provided it is not at the expense of domestic goods and services, states will be allowed preferential treatment to goods and services from other states which respect human rights, treat workers fairly, and protect the environment.

3) Performance Requirements: States may impose requirements on foreign companies opening facilities within their country, such as to give preference to goods produced locally, hire a given level of local personnel and respect labour and environmental standards. States may also protect enterprises which serve community needs from unfair foreign competition.

4) Standstill and Rollback: No state party to the GAST can pass laws or adopt regulations that diminish local control of industry and services or that divert investors from local needs. Existing laws which give preferential treatment to foreign firms should also be rolled back.

5) Dispute Resolution: Citizen groups and community institutions should be able to sue companies for violations of this trade code. All judicial and quasi-judicial procedures shall be fully transparent and open to public observation. (Hines 2001) (1)

They are not anti-trade per se, as under localisation, “international trade will continue, but only when it provides for the most efficient distribution of goods after all external costs have been internalised and does not undermine the diversity and resilience of the traders’ local economies.” (Woodin et al. 77)

Unfortunately, for the rules of the WTO to be changed requires a consensus vote on proposed rules by all members, which in the light of the length of the Doha Trade Round Negotiations (and that to this day, even though out of date, the WTO agreements still rely on rules written in 1947 and 1994), means that such an option seems unlikely to happen, especially in the immediate future.

On the other side of the argument, many free trade advocates (as well as other actors) argue that rewriting the rules of the WTO in such a way, or other forms of environmental taxation or regulation, would be used an excuse for further import barriers and local market protection in European and US markets, instead of being driven by a desire to increase genuine environmental sustainability (Barber cited in Saunders et al. 2006: 7). Indeed, the National Farmers’ Union (NFU) and other farming organisations in the UK already often use spurious “food miles” environmental arguments to help promote domestically produced agriculture (NFU 2006, Farmers Weekly 2006).

Free trade advocates would also argue that these forms of protection leave the global trading system open to arbitrary political taxes, especially if companies or sectors are close to government. This could lead to a vicious circle of protectionism as countries try to out protect one another, as happened many times before the GATT was introduced in 1947 (Hoekman et al. 2001, Trebilcock et al. 2005).

Therefore, I have explored the potential of middle way which would try not to fall foul of current WTO rules and would try and incorporate the arguments made of environment regulation being used as veiled and arbitrary protectionism. This middle way would aim to achieve the environmental objectives while still being legal and subject to legal test.

A middle way: Life Cycle Assessment Vision

Many have suggested that “food miles” - the distance food travels from producer to consumer – should be used as an environmental measure to be taxed in an attempt to internalise the energy costs and negative environmental externalities related to the transport of agricultural goods. However, such a tax based on food miles would seem to easily fall foul of WTO rules, especially Articles I, III and XI (see below for more detail). (2)

Not only is food miles likely to fall foul of WTO rules but it is a simplistic measure which only uses the distance travelled in determining how energy intensive and greenhouse gas polluting a certain product is. A much more complex model must be used to measure energy inputs used in a product.

The New Zealand government has recently responded to the “food miles” movement in its export markets – such as the UK and Germany - by commissioning a report looking at the life cycle assessment of a few of its products, such as dairy products, apples, onions and lamb.

A Life Cycle Assessment (LCA) is an assessment of the environmental effects a product or service has during its lifetime, from cradle to grave. In an LCA all the important processes during the products lifecycle are included, from the raw materials which are brought in and used on the farm (the cradle) until the product is disposed of and the waste is dealt with (the grave). An LCA can, for example, be used for assessing how much greenhouse gas is emitted to the environment during the production of one litre of milk.

The New Zealand report, written by Caroline Sanders et al., found that:

"it is not the distance that should be assessed but the total energy used, production to plate including transport. The results of this analysis show that NZ products compare favourably with lower energy and emissions per tonne of product delivered to the UK compared to other UK sources. In the case of dairy NZ is at least twice as efficient; and for sheep meat four times as efficient." (Saunders et al. 2006: v)

Even though the report underestimates the energy associated with certain areas of production in the UK due to the lack of information it still finds that in the case of dairy New Zealand is at least twice as efficient as the UK in dairy production. Some of the main differences that the report lists of differences between UK and New Zealand agriculture include the amount of fertilisers used, the amount of animal feed and fodder used and the percentage of the total electricity generation coming from renewables.

Therefore, for the purposes of this paper, I have explored if a environmental tax based on life cycle assessments on all agricultural products would fall foul of WTO rules. Such a tax could be placed on products which, throughout their lifecycle, used more net energy than a certain commonly agreed level for that specific product. The tax could be progressive (i.e. the more energy used, the more tax applied) or there could simply be a base-line, and any products which use above that level are taxed a certain amount. Rather than outlining more of the explicit details of such a tax (which would be decided if and when such a policy was introduced), I explore the conceptual possibility of such a model existing with the current WTO framework.

Could it legally be done in principle?

In this section I outline what the objective of such a measure is, what would need to be proven for such a measure to be accepted within the general principles of the WTO, and finally how it would be judged. Previously, no-one has handled such a case in the WTO, however based on other rulings, I make the case that the lifecycle assessment tax not only makes ecological sense but also fits in with these past rulings. Rather than trying to outline all of the details of previous rulings, I have instead tried to give more of the spirit and the fundamental ideas underpinning WTO principles. As WTO rulings are taken on a case by case basis, it must also be noted that I can not say in certainty that it would be accepted.

The objective of the measure would be to reduce harmful greenhouse gases. A focus could be put on solely reducing carbon emissions, as with the European Trading scheme, or the measure could attempt to reduce a selection of greenhouse gases, including, for example, methane. I have deliberately chosen reductions in greenhouse emissions to prevent climate change as an objective because it is a global phenomena with global impact. Instead of choosing a criteria which tries to place taxes on a localised phenomena which negatively effects local environments (e.g. a tax on clothing made from India which causes pollution in Indian rivers or a tax on shrimp which swims through Indian waters which is not harvested according to American standards for preserving turtles) which inevitably comes up with more issues surrounding extraterritoriality and the ability of one nation to demand a certain level of environmental regulation upon another (especially when such regulation is focused on local environmental impacts), I have chosen emissions reductions as an objective because it has global impacts.

For a life cycle assessment tax not to fall foul of the WTO, it must not conflict with the relevant articles, namely Articles I, III and XI. If the measure is not accepted under these articles, then Article XX can be invoked as a defence. Unlike the other Articles, where the member country bringing the case to the WTO has to prove their case, if a member invokes an Article XX exception as a defence, they must bear the burden of proof. This will be explored below by briefly detailing each Article and relevant case law.

Article I – Most-Favoured Nation (MFN) Treatment

The MFN rule requires WTO member countries to treat ‘like’ products from a WTO member as favourably (or no less favourably) as it does any other member. The Article requires “any advantage, favour, privilege or immunity granted by any Member to any product originating in or destined for any other country” to be granted “immediately and unconditionally to the like product originating in or destined for the territories of all other Members” (General Agreement on Tariffs and Trade 1994: Article I) In other words, discriminating between foreign producers is prohibited. If a tax or regulation is introduced for a product, it must apply equally for all foreign producers.

For a Life Cycle Assessment tax not to fall foul of Article I, it must be applied equally to all foreign producers. This has been tested in various case law, including in the report of the panel for Indonesia – Certain Measures Affecting the Automobile Industry 1998 (Bernasconi-Osterwalder et al. 2006: 57).

Article III – National Treatment

The National Treatment rule requires all trading parties to treat ‘like’ products of member nations as favourably as it treats its own domestic products. Article III:2 of the GATT states that “internal taxes, and laws…should not be applied to imported or domestic production so as to afford protection to domestic production” as well as requiring WTO Members to subject “directly competitive or substitutable products” to similar levels of taxation (General Agreement on Tariffs and Trade 1994: Article III:2) Article III:4 goes onto state very clearly that “The products of the territory of any contracting party imported into the territory of any other contracting party shall be accorded treatment no less favourable than that accorded to like products of national origin in respect of all laws, regulations and requirements affecting their internal sale, offering for sale, purchase, transportation, distribution or use.” (General Agreement on Tariffs and Trade 1994: Article III:4) Under Article III, WTO members must treat foreign products in a similar manner to domestic 'like' products to prevent discrimination or trade restrictions.

Within the WTO, the concept of ‘like’ products is key (including within Article I), although not always clear. When assessing the meaning of ‘like' products under both Article I and III, it is useful to bear in mind the Appellate Body’s accordion metaphor for interpreting the term in Japan – Alcoholic Beverages 1996:

“The concept of “likeness” is a relative one that evokes the image of an accordion. The accordion of “likeness” stretches and squeezes in different places as different provisions of the WTO Agreement are applied. The width of the accordion in any one of those places must be determined by the particular provision in which the term “like” is encountered as well as by the context and the circumstances that prevail in any given case to which that provision may apply.” (Japan - Alcoholic Beverages 1996 AB report cited in Bernasconi-Osterwalder et al. 2006: 44)

Whether two products are 'like' or not is not always clear, and as the Appellate Body ruled on the Japan – Alcoholic Beverages 1996 case, it should be decided on a case by case basis and involve a “discretionary decision that must be made in considering the various characteristics of products in individual cases.” (Japan - Alcoholic Beverages: 1996 AB report cited in ibid: 44) Although there is no one precise and absolute definition of what 'like' products are, there are four general Border Tax criteria which are sometimes used to help conduct a “likeness” test. Those criteria are:

(i) the properties, nature and quality of the products
(ii) the end-uses of the products
(iii) consumers’ tastes and habits
(iv) the tariff classification of the products (EC – Asbestos 2001 AB report, paragraph 101 cited in ibid: 67)

To test the four criteria listed above, the panel and/or the appellate body must “evaluate all of the relevant evidence” (EC – Asbestos 2001 AB report, paragraph 113 cited in ibid: 69) and look in-depth at each criterion. If products are not considered ‘like’, Members may treat them differently. For a Life Cycle assessment tax to not fall foul of WTO principles, it must be shown that, under the above criteria, that less polluting agricultural products are not ‘like’ more polluting agricultural products. It would also have to be shown, that the measure was not trying to covertly “afford protection to domestic production” (General Agreement on Tariffs and Trade 1994: Article III:2) by applying the tax equally for domestic and foreign production. Otherwise, if they are considered ‘like’, they must generally be treated similarly and preferential taxation or discrimination would not be allowed (unless further contested under article XX).

If it is accepted that the different production processes have different environmental implications, then the WTO’s non-discrimination obligations would grant flexibility to Members enacting environmental regulation. As expressed in United States – Measures affecting alcoholic and malt beverages 1992, “Article III is not to prevent contracting parties from differentiating between different product categories for policy processes unrelated to the protection of domestic production” (US – Malt Beverages 1992 panel report, paragraph 5.25 cited in Bernasconi-Osterwalder et al. 2006: 33) There is sufficient scope within Article III for countries to decide how it wants to achieve a stated policy goal as long as it does not afford protection to domestic production.

A relevant example of when a product was not considered to be ‘like’ due to impacts on the environment is the unadopted report of the panel on US – Taxes on Automobiles 1994, where the panel concluded that cars operating above and below a certain fuel efficiency were not ‘like’ products. If the tax and its threshold 22.5 mile per gallon fuel efficiency standard did not afford protection to domestic production (because it was applied equally to domestic and foreign automobiles), the panel found that (i) domestic automobiles above the fuel efficiency threshold and foreign automobiles below the threshold were not ‘like' products; (ii) “an individual imported automobile whose model type fuel economy was less than 22.5 mpg was not 'like' an individual domestic automobile whose model type fuel economy was above 22.5 mpg, even if the fuel economy of the individual domestic automobile was below 22.5 mpg” (US – Taxes on Automobiles 1994 panel report, paragraph 5.32 cited in ibid: 36). Although this was an unadopted report, the Appellate Body has said that ‘a panel could nevertheless find useful guidance in the reasoning of an unadopted panel report that it considered to be relevant’ (Japan – Alcoholic Beverages 1996 AB report, sec. E cited in ibid: 5). Hopefully, any ruling on a LCA tax would incorporate this distinction between more and less polluting agricultural products.

Even if it is ruled that the domestic and imported products are ‘like’ products and falls foul of Article III, a measure might be justified under one or more of the exception clauses of Article XX (for more detail, see below). Article XX allows a member country to adopt and enforce a measure even though it is inconsistent with other provisions of the WTO. If such a defence fails, then the challenging Member may impose trade sanctions until the challenged Member comes into compliance with the recommendations of the Dispute Settlement Body (DSB).

In EC – Asbestos 2001, Canada asked the panel to declare that a French ban on asbestos-containing products violated Article III:4. The panel found that even though the imported and domestic products were ‘like’ and that the measures discriminated against them in violation of Article III:4, the discrimination was justified under Article XX(b) exception clause due to health issues. (ibid: 66)

However, in an ensuing appeal, the Appellate Body found that the panel had erred in this analysis by not incorporating health risks as well as consumers tastes and habits within the context of the four Border Tax criteria. With respect to a LCA tax, consumers tastes and habits, as well as the other criteria, could potentially be used as a basis for the argument that climate change impacts upon consumers well being or health.

Article XI – Elimination of Quantitative Restrictions

Under this article, WTO members cannot limit or impose quantitative controls on exports or imports through quotas or bans. But duties, tariff and other charges are allowed. The Article explicitly states:

“No prohibitions or restrictions other than duties, taxes or other charges, whether made effective through quotas, import or export licences or other measures, shall be instituted or maintained by any contracting party on the importation of any product of the territory of any other contracting party or on the exportation or sale for export of any product destined for the territory of any other contracting party.” (General Agreement on Tariffs and Trade 1994: Article XI)

This Article has been violated in the context of a number of environmental disputes in which countries have imposed bans on the importation of certain products, and is thus relevant to this discussion. However, as I am proposing a tax to be imposed (on both foreign and domestic products), it should not conflict with this measure.

Article XX – General Exceptions to WTO Rules

Article XX allows, provided it is not arbitrary or unjustifiably restrictive, the adoption or enforcement of measures to protect public morals, to protect human, animal and plant life or health, or the natural conservation of exhaustible resources. Article XX of the GATT is a vital provision that attempts to address the tensions that can arise between trade and other legitimate policy goals listed as exceptions in paragraphs (a) to (j). The two exceptions most relevant for trade-related environmental measures (and those which I briefly discuss) are contained in paragraphs (b) and (g) of Article XX, which cover measures that are:

(b) necessary to protect human, animal, or plant life or health;

or

(g) relating to the conservation of exhaustible natural resources if such measures are made effective in conjunction with restrictions on domestic production or consumption. (General Agreement on Tariffs and Trade 1994: Article XX)

However, according to the introductory clause (chapeau) of Article XX, these measures are:

“Subject to the requirement that such measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail, or a disguised restriction on international trade” (General Agreement on Tariffs and Trade 1994: Article XX)

Unlike the other clauses, where the member country bringing the case to the WTO has to prove their case, if a member invokes an Article XX exception as a defence, they must bear the burden of proof.

Relevant case law includes US – Reformulated Gasoline where the panel determined that clean air is a resource, that such a resource is natural and finally that such a resource could be depleted. (US – Reformulated Gasoline panel report, paragraph 6.37 cited in Bernasconi-Osterwalder et al. 2006: 79) This could be used to show that clean air and a stable environment are justified exceptions because they are capable of depletion.

Other key dispute are the US - Shrimp/Turtle cases (US – Shrimp/Turtle I, US – Shrimp Turtle II and US – Shrimp Turtle 21.5).Initially, it was found that a US import ban on shrimp harvested in a way that posed risks to sea turtles was inconsistent with Article XI. However, it must be noted that the Appellate Body in US – Shrimp/Turtle I did find that the words in Article (g) “must be read by a treaty interpreter in the light of contemporary concerns of the community of nations about the protection and conservation of the environment.” (US – Shrimp Turtle I AB report, paragraph 134 cited in Bernasconi-Osterwalder et al. 2006: ) as well as noting a “recognition by WTO negotiators that optimal use of the world’s resources should be made in accordance with the objective of sustainable development.” (US – Shrimp Turtle I AB report, paragraph 153 XX cited in ibid: 121)

In 2001, three years after its initial Shrimp/Turtle ruling, the Appellate Body clarified and elaborated on its original holding (referred to as US- Shrimp/Turtle 21.5 2001). One of the Shrimp/Turtle complainants, Malaysia, had challenged the corrective measures the United States had taken in response to the Appellate Body decision. This second Appellate Body panel held that the United States had brought its turtle-friendly trade measures into compliance with Article XX by making “serious, good faith efforts to negotiate and conclude a multilateral sea turtle conservation agreement that would include both Malaysia and the United States” (3) (US – Shimp/Turtle 21.5 AB report, paragraph 115 cited in ibid: 129). It also found that the United States turtle-friendly trade measures permitted “a degree of flexibility that…will enable the United States to consider the particular conditions prevailing in Malaysia” (US – Shimp/Turtle 21.5 AB report, paragraph 148 cited in ibid: 138) as long as the Malaysian program is “comparable in effectiveness” (US – Shimp/Turtle 21.5 AB report, paragraph 148 cited in ibid: 137). Finally, as long as decisions made, as ruled in US – Shrimp/Turtle I, were open and transparent, then the Appellate Body had no reason to fault the United States.

The Appellate Body also reconfirmed that “conditioning access to a Member’s domestic market on whether exporting Members comply with, or adopt, a policy or policies unilaterally prescribed . . . may, to some degree, be a common aspect of measures falling within the scope of one or another of the exceptions (a) to (j) o Article XX” (US – Shimp/Turtle 21.5 AB report, paragraph 138 cited in ibid: 136)

This means that conditioning access to a Members domestic market is potentially allowed if the particular circumstances in the exporting country are taken into account to make administrative determinations more flexible; if due process and transparency is upheld in administrative proceedings; and if serious efforts to negotiate a treaty with affected countries are made before adopting any trade measures. With respect to the US - Shrimp/Turtle 21.5 ruling, a LCA tax would seem to plausible if such actions were taken before introducing it.

Some final questions

In the limited space, I have only able to touch on many issues briefly and have left many other questions unanswered, such as: What are the practical limitations of a LCA tax? Would an international body be set up to make life cycle assessments so as to prevent bias and countries misreporting statistics? How would they monitor these assessments, and would this method be effective? How far could one Member go in trying to negotiate such a measure before heavily infringing on how another Member determines national policy? How would the issues surrounding extraterritoriality in the WTO feed into this? What would the effects of such a measure have on international trade flows? Would these measures bias larger farms because they could pay for such assessments? These are highly contested questions and hopefully I will be able to explore them in future research.

Conclusion

I have shown that there is the potential for a life cycle assessment tax as long as it is unilaterally imposed on all domestic and foreign producers (and not used as a tactic to afford domestic protection) and is applied in the manner of a tax (rather than a quota). Member countries, if they want to introduce it in a manner consistent with their other obligations under the WTO, should try and show that more polluting forms of agriculture are not ‘like’ less polluting forms of agriculture. Even if this fails, an exception might be made under Article XX.

For such a tax to be excepted under Article XX, the particular circumstances in the exporting country would have to be taken into account to make administrative determinations more flexible, due process and transparency would have to be upheld in administrative proceedings and serious efforts to negotiate a treaty with affected countries would also have to be made before adopting any such trade measures.

Although other considerations would need to be explored before such a tax could be introduced, there is clear potential for such a measure to not only come within the objective of reducing greenhouse gases but also to not fall foul of WTO rules and regulations.

Footnotes

(1) A fuller description of how the GAST would operate can be found in Woodin et al. 2004: 77-82 and Hines 2001.

(2) In simple terms, food miles could be seen as a measure to discriminate between nations depending on how far away they were from the end consumers. This would inevitably be seen as discriminating on origin-related criteria as well as affording protection to domestic production.

(3) They also cited Principle 12 of the Rio Declaration on Environment and Development: “[e]nvironmental measures addressing transboundary or global environmental problems, should, as far as possible, be based on international consensus.” (US – Shimp/Turtle 21.5 AB report, paragraph 124 cited in Bernasconi-Osterwalder et al. 2006: 131)

Bibliography

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http://groups.yahoo.com/group/climatechangepolitics/message/2621

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Comments

Grade: A-

From Professor One:

Interesting paper on an important topic. Well argues and succinct. Makes the general point well: policies to deal with global environmental issues through commodity taxes are, or can be made to be, consistent with WTO rules and the existing trade system. The discussion of the GAST proposal is succinct, but not elaborated in detail – which seems appropriate, given the focus of the paper and the obvious incompatibility of GAST with any aspects of the existing international trade system.

The discussion of the LCA approach is ok, but also sparse. In this case, since the paper argues that the LCA approach can fit into existing WTO framework of trade rules, more discussion would have been warranted. For example, environmental economists argue that we should tax pollutants, not commodities. If we do so globally, then LCA is handled automatically since commodity prices would then reflect the “correct” costs of embodied pollutants. In this case, there is no need to worry about whether the goods are traded internationally or not.

The more subtle question is whether there is a potential role for trade policy in enforcing global environmental policies. Can we achieve global environmental policies within the existing WTO structure?

From Professor Two:

Very good paper and very relevant topic. Central question clearly defined, paper well structured, and exposition of arguments convincing. The LCA tax looks promising and clearly much better than a distance tax. The paper shows that the LCA tax is feasible and compatible with WTO article, but at the same time acknowledges that even so it will not be easy to make it implemented in the future, as a number of important issues remain. What the paper lacks is a stronger discussion on emission cuts – for example by explaining how the UK government and the Tyndall report have arrived at the numbers they had. Finally, in the presentation of the two alternative approaches, the paper could have discussed the possible developmental implications of GAST provisions, which did not come up when the market protection argument was discussed.

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