WTO Ministerial Section • Volume 5 • Number 22 • 9th December 2005

Environment @ Hong Kong

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Environmental issues may crop up at the upcoming WTO Ministerial Conference being held on 13-18 December in Hong Kong, China, but are likely to be overshadowed by developmental and other concerns (see related story, this issue). The issues most likely to arise include environmental goods and services (EGS), fisheries subsidies and disclosure requirements for patents involving genetic resources.

Environmental issues have been the subject of discussions and negotiations in a number of different fora in the WTO mandated by different parts of the 2001 Doha Declaration that launched the current round of talks. For example, the mandate under paragraph 31 of the Declaration includes negotiations on the relationship between existing WTO rules and specific trade obligations in multilateral environmental agreements (MEAs), and on trade in environmental goods and services (EGS). Other environment-related mandates include negotiations to clarify and improve WTO disciplines on fisheries subsidies which have been held in the Negotiating Group on Rules; and talks on the relationship between the Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPS) and the Convention on Biological Diversity (CBD) which have been taking place in the TRIPS Council (see related story, this issue).

Trade and environment talks likely to focus on environmental goods

Discussions in Hong Kong under the trade and environment mandate are likely to focus primarily on environmental goods and services. Negotiators will have to choose between two options on how to proceed on the liberalisation of EGS after WTO delegates in Geneva were unable to agree on which approach to adopt in the draft Ministerial Declaration. The draft text on the table in Hong Kong includes two bracketed options for how to move forward in the EGS negotiations after the Ministerial meeting.

Members remain broadly divided into two camps over the approach to take on the "reduction or, as appropriate, elimination of tariff and non-tariff barriers to environmental goods and services". One group dominated by developed and newly industrialised countries supports the so-called ‘list’ approach, which consists of listing goods earmarked for accelerated liberalisation. The second group, which includes most developing country Members, remains sceptical of the list approach, arguing that the lists submitted so far only contain goods of export interest to rich nations. The only alternative to the list approach that is seriously being discussed at this stage is the ‘environmental project approach’ put forward by India, according to which tariffs on environmental goods and services that are being used in specific projects would be reduced or eliminated for the duration of the project (see Bridges Trade BioRes, 28 October 2005).

Of the two bracketed options, supporters of the list approach prefer the option that would call on Members to "complete by …2006 the work under Paragraph 31(iii) by identifying environmental goods". Developing countries would like to leave subsequent discussions more open by instructing Members to continue their work towards developing a "common understanding" on how to proceed (see Bridges Trade BioRes, 25 November 2005).

It is unlikely that other parts of the negotiating mandate under paragraph 31 will be addressed, such as clarifying the relationship between trade-related obligations contained in MEAs and WTO rules and the development of procedures for regular information exchanges between the WTO and MEA secretariats as well as MEA observer status to relevant WTO negotiations. The draft Ministerial text simply acknowledges work undertaken in these areas and encourages Members to intensify negotiations in all areas of negotiation under the trade and environment mandate.

Attempts to raise profile of fisheries subsidies at Hong Kong

The draft ministerial text on WTO Rules also includes a section on the fisheries subsidies negotiations that calls on Members to strengthen disciplines on subsidies in the sector, including by identifying and prohibiting subsidies that contribute to over-capacity and over-fishing. It makes a reference to special and differential treatment (S&DT) for developing countries and highlights the sector’s importance to poverty reduction, livelihood and food security concerns.

WWF welcomed the text’s explicit mention of over-capacity and over-fishing as an important step, as some countries had earlier been reluctant to address subsidies others than those that may directly distort trade patterns in the negotiations (see Bridges BioRes, 25 November 2005).

While the draft text had found broad support among most Members in the lead-up to the Hong Kong meeting, some trade sources suggest that Korea and Chinese Taipei feel that the fisheries text goes too far and there is some speculation that they may try to tone down its language in Hong Kong. The so-called "Friends of Fish"– a loosely defined group of countries such as New Zealand, Chile, Peru and the US which support a broad ban on fisheries subsidies with exemptions — will not take the initiative on reopening the text, although they would like a clearer mandate for subsequent negotiations.

While negotiations at the ministerial level are unlikely to focus on fisheries subsidies, delegates at lower-level meetings held in Hong Kong will likely continue to discuss the issue. Ahead of the Hong Kong meeting, some countries, including Brazil, Chile, Colombia, Ecuador, Iceland, New Zealand, Pakistan, Peru and the US, have attempted to raise the profile of the issue by submitting a joint report to the Negotiating Group on Rules on 22 November (TN/RL/W/196) that outlines the progress to date and calls for a quick move to text-based negotiations. In a similar vein, Brazil submitted a last-minute proposal (TN/RL/GEN/79) to the last pre-Hong Kong session of the Rules Group on 29 November. The document for the first time proposes draft legal text for comprehensive fisheries-specific subsidies disciplines which would be annexed to the existing WTO Agreement on Subsidies and Countervailing Measures (ASCM).

Move to text-based negotiations?

Brazil’s proposed disciplines would cover all subsidies that are "given to or on behalf, directly or indirectly, of fishing interests", including payments made by one government to another in return for access to foreign waters. It would not apply to subsidies for inland fisheries and aquaculture. Brazil proposes to prohibit all subsidies that have a trade- or production-distorting effect, but exempts capacity-enhancing subsidies provided by developing countries under some specified circumstances. This so-called ‘top-down’ approach has faced objections from Japan, Korea, Chinese Taipei and the EC who prefer to list prohibited subsidies on a case-by-case basis.

Brazil defines "production-distorting" subsidies as those having a negative effect on "the sustainability of fishing resources", going on to provide the first attempt at putting this concept into practice in the negotiations. In the case of fisheries under the jurisdiction of a regional fisheries management organisation (RFMO), a negative effect refers to "any violation of the quotas or other rights established by those RFMOs". For all fisheries not covered by RFMOs, such effects are taken to refer to an annual increase of more than three percent of the most recent volume catch data published by a competent international organisation. Under this definition, a developing country subsidy to a fishery that was not covered by an RFMO would, if a competent international organization indicated that annual catch of a relevant species had increased by more than three percent, be ruled to be production distorting and WTO-illegal.

Several Members of the Friends of Fish group and some developing countries called the proposal a good starting point while many others, including Korea, Peru and the EC, questioned the role that Brazil’s submission ascribes to RFMOs in the disciplines. Korea pointed out that RFMOs only cover a limited number of fish species and that many have a record of low performance. Other Members were concerned that Members that are not part of such organisations, especially from developing countries, may as a result be treated relatively less favourably.

The Brazilian proposal also outlines the broad range of information that subsidy notifications would have to provide. Any non-notified subsidy would be WTO illegal, a provision that China objected to strongly. The EU, on the other hand, criticised the notification requirements for being insufficient to provide for an effective enforcement of the new rules. The Brazilian proposal will likely be taken up in the aftermath of the Hong Kong meeting.

The 1 December version of the draft Hong Kong Ministerial Declaration is available at http://www.ictsd.org/ministerial/hongkong/docs/05-12-01_draft_ministerial_text_revised.pdf

ICTSD reporting.