Part Three: Solutions to reconcile the environment and trade.

As the existing WTO dispute settlement system could not deal with the conflict well in the view from environmental protection, there have a lot of potential solutions been recommended.

1. Exemption of multilateral environmental agreements in GATT through waiver.

The WTO agreement explicitly allows parties to waive GATT obligations in exceptional circumstances. So it is worth considering to exempt multilateral environmental agreements from GATT rules. Of course, such waiver should be approved by a three-fourths majority of GATT parties. It is not impossible in some circumstances.

Although someone argues that this approach appears to rank the GATT/WTO and trade liberalization above multilateral environmental protection, it would prove to be useful in the interim.

2. Amending the GATT.

Because of the vague language used in Article XX of GATT and the narrow interpretation of these grounds by the Panel and the Appellate Body, it became very difficult for a country to use it as safeguard to protect environment. So there are suggestions to amend the GATT and give express provision to exempt environmental protection action, ie, a real “green exception”.

3. Procedural changes to dispute settlement under the GATT/WTO.

Assuming for a moment that GATT/WTO in the proper forum for adjudication of trade and environment disputes, there are ways to make future WTO tribunals more conducive to fair and informed decision-making. For example, the selection of panellists. The objective of panellists is to create a sufficiently diverse background and a wide spectrum of experience. So one can argue the WTO tribunals should include experts in the realm of environmental protection. The panel member should be recognized by both trade and environment concerns. Maybe things will be different in that case.

4. Change of forum, ie, change the dispute settlement forum from the WTO to other international body, for example, International Court of Justice(ICJ) it would be more neutral and more fair to both sides.

Other suggestions include setting up a new global environmental organisation equal to the WTO regime. Some environmentalist even suggest that “in order to force a more environmental friendly interpretation of Article XX, one of the member countries, particularly the United States or the European Union, may have to start ignoring the WTO’s decisions.21” However, we think it is not a positive attitude to solve the problem and the above-said suggestions are either infeasible in some aspects or difficult to achieve. In our view, the eco-labelling scheme is comparatively practicable solution. So next we would like to introduce it. It is impossible for us to introduce all details of the eco-label, so we only discuss some main points:

Eco-label is also referred to as green-label which means putting labels on products to inform consumers of their environmentally-friendly character. It comes into being accompanied with the political awakening and rising level of public concern with the environment protection. In 1971 the Germany government put first forward the concept of Eco-label for consumer products22, and in 1978 the first Eco-label program in the world was launched in Germany23. Now there are over 20 countries, especial industrilized countries, including Canada, Japan, Norway, Austria, France, Singapore, etc, have adopted the Eco-label program in many different forms at local, national, regional and international level.

Under all programs currently existing or proposed there are committees with broad representation—with members from the government department concerned, as well as consumer, environmental, and industry interests—that determine or suggest to a government minister which product categories are eligible for labelling. Within each category the scope of products is defined, and the threshold criteria a product must meet is established with the help of experts. Domestic or foreign manufacturers may, if they so wish, submit products for consideration. If the product meets the criteria of the product category, a label can be obtained and used when marketing the product, in accordance with the terms and conditions of the contract concluded with the committee or administering body.

The main objective of eco-labelling programs is to harness market forces and channel them towards promoting more environmentally-friendly patterns of production. Eco-label provides consumers with easily recognisable symbol, indicating the product environment friendliness has been assessed and approved by certain organisations or governments. Thus, it can help consumers, especial "green consumers" to make informed purchasing decisions. Meanwhile eco-label also leads to higher and higher environment consciousness of consumers. Eventually, the manufacturers will be forced to change their product process into a more environmental friendly process. If the manufacturers don’t improve the image of their product, they will lose their market. Because of its market function, Eco-label is regarded as less trade restrictive measures than bans or outright product regulation. Eco-label has increasingly become an effective instrument for harmonizing the conflict between the free trade and environment protection.

Although the eco-labelling scheme is an effective method to protect the environment with more compatible with the WTO, and most of the labelling scheme is voluntary, it is still argued that it may act as de facto trade barriers. Especially the developing countries think that the labelling scheme may often result in discrimination against foreign producers and is a non-tariff barrier to free trade in fact. They argue that the nature of the labelling scheme is discriminatory because its goal is to select only those product that have significantly less environmental impact compared with other products in their category. And also whether certain processes and production methods are, or not, environmentally sound would depend on how a national label awarding body defines the criteria for a product to be eligible for a label. Another reason for labelling program being viewed as a trade barrier is that it involves requirements that put small and foreign producers at a disadvantage because of the costs involved or other reasons.

In the past years, some disputes have arisen from the labelling schemes. We would like to introduce the dispute of Austria Mandatory Labelling Law. In 1992 in order to protect the tropical forest, the Austria parliament introduced new legislation with the aim of stopping all imports of tropical timber and tropical timber products from areas that were not sustainable managed. It requires all tropical timber and products sale in Austria must carry a label identifying them. The ASEAN24 complained to the GATT's Committee that the law did not required mandatory labelling of other types of wood and wood products imported into Austria or produced domestically. They charged the Austria law was in violation of both the "most-favoured-nation" (MFN) and "National Treatment" provisions of the GATT and was discriminatory, unjustifiable and an unnecessary obstacle to trade. While Austria argued that the labelling requirement did not constitute an obstacle to trade since product labelling per se was not a trade restriction and the law did not impose any quantitative or qualitative restriction on imports from any destination. It also alleged the law was not discriminatory in nature because it applied to any tropical timber or tropical timber product, irrespective of the country of export or origin. However, faced with likelihood of losing the case if it were to be referred to the GATT Panel, Austria amended its law. Under the amended law the labelling requirement is (like any other eco-labelling program) voluntary, and the quality mark can now be issued to all kinds of timber and timber products from sustainable managed forest.

From the discussion above we can see that the eco-label is an effective way to protect environment and has less negative implication to free trade. In order to avoid dispute the key issue is that the trade impact of ever-growing environmental labelling programs will depend substantially on how the schemes are administered. This is also recognised by the CTE, which stated "well-designed eco-labelling schemes/programs can be effective instruments of environmental policy to encourage the development of an environmentally-conscious consumer."25

Aiming to the effectiveness of eco-labelling schemes, the following proposals should be incorporated into the Eco-labelling program in the future:

Harmonisation. There are many different Eco-labelling scheme standards among different labelling scheme countries in the world, even some are diverse. At the same time, different standards increase costs for producers if they have to meet a variety of labelling requirements in different countries. Harmonisation can help mitigate the adverse effects and decrease the cost of products while maintaining environmental goal. It is important to small foreign suppliers and those from the developing countries.

Mutual Recognition. It means to recognise the validity of divergent environmental criteria and ensures that trade interests are not unduly affected by this diversity. It can escape the condemn of discrimination and extrajurisdiction. Mutual Recognition will be much easier between countries having compatible levels of economic development.

Transparency. Because eco-labelling scheme primarily focus on domestic condition, it is difficult for foreign producers to gain access to the information to comply with those schemes. Promoting transparency to all interested parties, including exporting and developing countries, can help the interest of other countries, and facilitate environmental objectives and trade. It also can alleviate political pressure from other countries.

Technical Assistance. Providing technical assistance to developing countries may help reduce the potential negative trade effects of environmental labelling on developing countries. Technical assistance can play an important role in helping developing countries establish their own programs and will consequently lead to international deliberations.
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