Issue brief - Entwined

ON THE ROLE OF MEAS IN THE WTO: LEGISLATORS’ SILENCE SPEAKS VOLUMES
that would provide benefits to all parties. That is, negotiators do
not only divide the cake, they also largely “bake” it. This can be
very costly, for two reasons. First, negotiations utilize administrative
resources, both at the negotiating table and in ministries and
governmental agencies of the parties, in particular in the form of
labour. Second, negotiating a large agreement takes time, implying
that the parties have to wait before they can enjoy the fruits of
their cooperation – in economic terms, there is a welfare loss due
to the discounting of the future benefits of the agreement.
Parties forming agreements take into consideration negotiation
and implementation costs alongside the benefits that the agreements
are expected to yield from reduced international externalities.
It may, therefore, be desirable to forego the gains of very elaborate
agreements if such agreements are very costly to bring about.
The parties will instead settle on cruder, but cheaper, agreements.
The literature suggests several ways of reducing such costs. For instance,
contractual bindings can be rigid rather than conditioned
on changes in the economic environment, an example being tariff
bindings that apply irrespective of changes in demand and supply
conditions. The agreement may also lack bindings, and instead
leave discretion over certain policies to the parties, such as the
GATT, which leaves discretion over domestic instruments to the
Members. In addition, contractual provisions may be expressed
vaguely in order to reduce negotiation efforts. These methods of
reducing negotiation costs imply that the resulting agreements are
incomplete in various ways.
In Horn and Mavroidis (2011) we propose an alternative
means of reducing negotiation costs: separating negotiations and
agreements. In particular, negotiations over a single, complete
agreement that comprises both trade and environment would obviously
be extremely costly. By negotiating separate agreements
in the two policy areas the parties can conclude the negotiations
more quickly. This approach is also likely to reduce administrative
resource requirements, since resources will not have to be spent
on coordination across issues. Of course, the cost savings come at
a price: the parties have to forego any benefits of a single agreement.
IMPLICATIONS FOR THE ROLE OF MEAS IN WTO DISPUTES
In seems plausible that the separation of trade and environmental
agreements is the result of both the strategic benefits that separation
yields for certain countries and the costs associated with
negotiating an agreement encompassing both trade and the environment.
What is the implication of this for the appropriate role
of MEAs in the WTO legal order?
First, while strategic reasons may explain separation of agreements,
they do not seem to explain why the separate agreements
would have gaps. Where separation is driven by strategic considerations
(i.e., parties have intentionally kept the MEA outside the
WTO), the case-law path must be trod with great caution. Judges
are in clear danger of undoing the balance of righs and obligations
between WTO Members if their decisions short-circuit the two
agreements.
Second, where negotiating costs explain separation of MEAs
and the WTO, WTO Members have abstained from sorting out
the relationship between obligations in the two sets of agreements.
It is therefore unclear to the parties how to best view the relationship
between them. Intuitively, it would then seem exceedingly
difficult for WTO judges to identify solutions that would be in
the long-term interest of all countries.
These two sets of reasons for the separation of WTO and MEAs
lead us to conclude that caution is recommended on the part of
WTO judges. However, we still believe that MEAs could provide
a useful role in adjudication, as sources of information. For instance,
an MEA may contain information regarding factual aspects
of dangerous substances, or about the extent to which environmental
measures are based on scientific evidence. As long as
WTO judges do not alter the balance of rights and obligations
between the WTO Members, it would be beneficial for the both
the trading system and the environment that WTO judges use
such knowledge embedded in MEAs.
In conclusion, the reluctance of WTO adjudicating bodies to
fully embrace MEAs is warranted. Legislators’ silence should speak
volumes to WTO judges.
WAY FORWARD
It seems highly unlikely that this issue will be settled through
legislative action at the WTO level. In today’s world, where the
entire Doha round is at stake, it is doubtful that negotiators
will add such a thorny issue to the current workload. One can
expect resolution of the issue at the adjudication level. The key
is to help participants in the process to understand that in the
long run it is in the common interest to encourage informed
rather than uninformed judgments.
POLICY IMPLICATIONS/
POLICY RECOMMENDATIONS
WTO adjudication is, by definition, a reaction to submitted
briefs. If WTO Members insist on invoking MEAs when lodging
their briefs, WTO adjudicating bodies will find it difficult
to ignore them. Civil society, through amicus curiae, could also
play a role here.
The ‘legislative arm’ of the WTO has not offered anything so
far, but has at least kept alive the possibility of working out
the role of MEAs in the WTO. The composition of the WTO
Committee on Trade and the Environment is likely to importantly
influence the possibility of progress on this issue. If those
participating in this committee came from departments dealing
with environmental protection (as opposed to pure trade departments),
bridges to MEAs may be built more naturally. The
WTO Committee on Technical Barriers to Trade is an excellent
illustration of how making room for technical expertise can
lead to informed judgments and help resolve trade concerns; a
number of potential disputes are being discussed therein and
only very few end up before WTO Panels.
6 ISSUE BRIEF