Select Committee on Environmental Audit Second Special Report





1. The Government welcomes the Committee's report, published immediately prior to the 3rd Ministerial conference of the World Trade Organisation (WTO) that took place in Seattle from 30 November to 3 December 1999. This is a joint reply by the Department of Trade and Industry, Department of Environment, Transport and the Regions, and the Department for International Development.

2. The Committee will be aware that the Seattle conference was suspended without agreement on the terms for a new Round of trade negotiations. The Government regrets that Trade Ministers did not reach agreement on the terms for the launch of a Round. The UK, EU and many other member governments of the World Trade Organisation (WTO) had hoped to launch a comprehensive Round reflecting our belief that this is the best means of delivering substantial trade liberalisation, consistent with sustainable development, and real gains for developing countries. The preparatory process for the launch of a Round has been remitted back to Geneva under the direction of WTO Director General Mike Moore who has also been asked to make recommendations on the timing and location of a future Ministerial Conference. No agreement has yet been reached on the timing for this Conference and the launch of a new Round. Most WTO member governments, including the UK and EU, remain committed to launching a new Round at the earliest opportunity. In the meantime, negotiations are beginning on agriculture and services from January 2000 as part of the built-in agenda agreed during the Uruguay Round.

3. The Government believes that the experience of the WTO to date and the failure of Seattle demonstrates an urgent need for the WTO to review the way it works to increase its effectiveness in launching and conducting future negotiations. The Government would like to see an inclusive process urgently launched to look at reform, preferably with the assistance of a Group of Eminent Persons which could carry out consultations and make proposals for improving its procedures. The Government is open to ways for taking this process forward providing it carries sufficient political credibility. And while the Government does not want to prejudge this process and possible solutions, in looking at reform it puts emphasis on two aspects: consensus building and communication. In relation to consensus building, the nature of the formal and informal WTO groupings and their relationships need attention to ensure the WTO builds genuine consensus. In relation to communication, we need to look at the wider issues of external consultation, transparency and communication with stakeholders and the public to see what more needs to be done both by the WTO itself and by national governments.

The Committee's conclusion and recommendations

4. The Government has the following comments on the Committee's conclusions and recommendations.


(a) The case for a comprehensive round has yet to be made convincingly. The existing 'built-in agenda' appears to: contain sufficient scope for benefits for all participants; constitute an already challenging task for negotiations in the time-scale proposed, particularly for developing countries; and cover the key areas in terms of sustainable development. A more satisfactory approach would, in our view, be to address this agenda with a view to consolidating the achievements of the multilateral trading system, building in environmental and development considerations, to achieve real and lasting promotion of development that is sustainable.

5. We disagree with this assessment. First, the built-in agenda contains no clear commitment to take account of environmental considerations throughout negotiations. It provides only for negotiations on agriculture and services, and reviews of some other agreements. Second, the built-in agenda does not allow the EU's priorities for trade and environment to be addressed: clarifying the relationship between Multilateral Environmental Agreements (MEAs) and trade rules; clarifying the relationship between non-product related process and production methods and in particular eco-labelling schemes; and examining the role of the core environmental principles, particularly the precautionary principle. Third, important potential areas for trade and sustainable development wins are not included, such as fisheries (this is not part of the agricultural schedules). Fourth, the built-in agenda alone will deliver far fewer gains for many developing countries than would a comprehensive Round. Finally, a comprehensive Round will be important in building up a broad political consensus to address environmental and development issues. A comprehensive Round is also the best way of allowing the interests of all WTO Members to be negotiated in a balanced way.

Developing countries

(b) We fail to see from our evidence what has changed since the Uruguay Round that rules out the danger of another 'stitch-up' by developed countries as described by the Environment Minister.

6. We disagree with this analysis. The Environment Minister's comment was made in the context of affirming the potential benefits to developing countries from a comprehensive Round. The WTO operates on a consensual basis and developing countries have their own interests and agendas for a new Round. At the Seattle conference, developing countries played a much more prominent and vigorous role in high level discussion than previously. This is a highly significant and positive development in global politics. Developing countries said no to deals that they had not been sufficiently involved in negotiating and which they did not view as benefiting them. Nevertheless, as we have always emphasised, there is a need to ensure that the WTO's decision making processes include all members, and ensure that their interests are adequately reflected in all negotiations.

(c) Assistance to build the negotiating capacity of developing countries to enable the effective participation at the WTO is as important as their presence at the table. The scope and progress of negotiations should therefore be linked in a concrete way to achievements in capacity-building programmes rather than simply relying on the provision of inputs to the process.

7. We agree with the importance of capacity building for developing countries. We have been providing direct UK support over the last two years, and are actively seeking more support from other international organisations. We have joined others in calling for a substantial increase in the WTO's technical assistance resources. We have also supported initiatives to mainstream trade in the development activities of the World Bank, and work in the OECD to identify best practice in trade related assistance. And we are working internationally in support of more consistent and comprehensive trade related assistance by all concerned agencies, multilateral and bilateral.

8. The UK is providing approximately £16m of trade­related technical assistance to enable developing countries to participate more effectively in the multilateral trading system in general and in trade negotiations in particular. Details of this support, which is provided on a bilateral basis as well as through multilateral institutions often better placed to deliver it, have been placed in the Library of the House. Our capacity­building work aims not just at getting developing countries to the negotiating table, but also at assisting them to articulate their needs and participate meaningfully in negotiations.

(d) The Government must apply the relevant advice from the British Government Panel on Sustainable Development (Fifth Annual Report) in the forthcoming review of the agreement on Trade-related Intellectual Property Rights (TRIPs) which is an important issue for developing countries and which should certainly be on the agenda agreed at Seattle.

9. As the Government has said in reply to the Panel, we will continue to be active in international efforts to reach workable solutions in this area. We particularly welcome the work being carried out by the World Intellectual Property Organisation (WIPO) on the protection of traditional knowledge and the intellectual property rights of indigenous and local communities. We will continue to participate in this work together with other WIPO members and interested parties.

10. We believe the current wording of the TRIPs agreement allows WTO members sufficient flexibility to implement patent and other intellectual property regimes appropriate to their circumstances. The UK will ensure that specific concerns, such as those over intellectual property rights covering lifeforms, will be at the fore of our approach to the built-in agenda of reviews of the TRIPS agreement.

The environment

(e) The overall conclusion of the non-governmental organisations (NGOs) was that the UK and the EU environmental agendas contained some fine words and important priorities, if little evidence of environmental integration across all areas. But there were grave concerns about the ability of the Commission, as lead negotiator, to deliver its environmental objectives. The Department of Trade and Industry assured the Committee that the Trade and Environment Directorates-General had performed a "double-act" in developing and presenting the EU's position. The NGOs were concerned however, that this act might not survive through to the negotiating process and recommended to us that concerned EU Member States must ensure the adequate environmental expertise was on hand to boost the Commission's capacity in this regard throughout the negotiations. We agree with these views.

11. The Commission and Member States consistently gave environmental considerations high priority in the preparation of the EU's negotiating position, in preparatory discussions with other WTO members, and at Seattle itself. The Commission delegation to the Ministerial included DG Environment officials. The Environment Minister, Michael Meacher, was a member of the UK delegation. A number of other EU delegations included environment Ministers, and most included environment officials. The Commission negotiates on the basis of positions agreed with Member States, and any new WTO agreements would require the approval of Member States. The UK and other Member States are therefore able to prevent the Commission agreeing to an outcome which would not be acceptable.

12. At Seattle, Member States voiced opposition within the General Affairs Council to the Commission's informal agreement to the establishment of a WTO Biotechnology Working Group. This demonstrated the ability of the UK and other Member States to intervene when they consider the Commission's negotiating stance is not in line with our broader policy objectives. In this case, Member States were concerned about the damaging message that the establishment of a Biotechnology Working group would have sent in relation to our commitment to the ongoing negotiations to complete a Biosafety Protocol under the Convention on Biological Diversity.

13. In the course of negotiations during the Round itself, environmental experts, both within the Commission and Member States, would be closely involved to ensure that the Commission's evolving position took sufficient account of environmental considerations in all areas of negotiation. Striking a balance between environmental and other trade policy considerations is a matter of political judgement. We do not believe that there is a risk of the EU's environmental voice not being properly heard during the course of negotiations.

(f) We regard achieving consensus to negotiate new WTO rules on the treatment of trade provisions within multilateral environmental agreements (MEAs) as a high priority for the Seattle Summit. We recommend that the UK and EU adopt the inclusion of text to that effect as its bottom line for the environment in any Ministerial Declaration. This could open the door to focused negotiations of more effective MEAs without the need for participants to have one eye constantly on the free trade implications and the possibilities of challenge within the WTO—a forum based on entirely different priorities.

14. Agreeing negotiations aimed at greater clarity of the relationship between trade provisions within MEAs and WTO rules was one of the UK's and EU's objectives at Seattle. It continues to be one of our key objectives for a new round of negotiations. It would be wrong, however, to imply that MEAs should be negotiated without regard for trade implications. We do not believe this is currently the case and would not want it to be. Developing countries have real concerns about the scope for eco-protectionism that might arise from a clarification of the relationship between MEAs and WTO rules. In defining such a clarification we will seek to secure adequate safeguards in order to prevent measures taken under MEAs being used for protectionist purposes. Overall, the Government's policy is designed to strengthen the multilateral approach to solving global environmental problems. There is far greater potential for protectionist actions arising from unilateral measures.


(g) We remain unconvinced of the need for multilateral rules for investment and wary of the risks that were identified for us during our inquiry into the OECD multilateral agreement on investment (MAI). Witnesses from NGOs pointed to the network of existing bilateral treaties and also the UN Commission on Trade and Development's conclusion that there was no discernible link between levels of liberalisation and investment flows.

15. The Government believes that an open and transparent international framework of rules governing foreign investment would benefit developing countries in particular, and also the world economy, as well as British investors. The WTO is by far the best international forum for developing such rules on a global basis. Bilateral treaties, with their varied standards and limited scope, are only a partial solution and bring few development benefits. Liberalisation by itself will not necessarily increase flows; many other factors are relevant. A recognised, credible and stable climate for investment is crucial. A multilateral framework for investment, grounded in the principles of non-discrimination and transparency, could establish a more stable climate for investment for domestic and foreign investors alike without undermining the right of countries to regulate, including for the purposes of environmental protection, in line with the same principles.


(h) We are concerned that once again environmental considerations have not been integrated into the development of 'mainstream' policy proposals but left to a later stage in terms of both preparatory analysis and strategy development.

16. See response to recommendation (e). Environmental considerations have certainly been a major factor in the Government's trade policy proposals since May 1997. Indeed, one of the key arguments for a comprehensive round has been from the start that we would be much more likely to achieve our objectives on the environment as part of a comprehensive negotiation.

17. There are a number of formal and informal assessments of the impacts of trade measures from governments, NGOs, academics and others, as well as debate on the impacts of WTO agreements within the relevant WTO Committees. Civil society clearly has an important role to play in contributing to the debate on this issue. The outcomes of such studies and assessments are taken into account in developing UK and EU approaches to trade negotiations. In an ideal world, we would want complete information about the environmental impacts of both previous and future trade measures. However, given resource limitations, incomplete information and the high degree of complexity and uncertainty involved, we do not believe that this is, or will ever be, fully achievable.

18. The EU's Sustainability Impact Assessment (SIA) is an important step forward in ensuring that the EU is able to reflect fully sustainable development considerations in it approach to trade negotiations. The work, so far, has included a preliminary assessment of the EU's proposed new trade measures, involving consultations with civil society and in time to inform developments at Seattle; and a thorough review of the findings and methodologies of previous studies. Together with our European partners, we will look to learn from this work in taking forward the SIA and our approach to future trade negotiations.

(i) We believe that new negotiations should do more that try to take note of lessons from the previous round. It seems axiomatic that the impacts of the last set of agreements should be informing the negotiations of the next. This is unlikely to be accomplished by individual WTO members acting in a piecemeal way, but needs some explicit agreement within the Organisation, as well as inclusion in any Declaration intended to shape negotiations.

19. See response to (h). We agree with the Committee on the importance of using previous trade agreements to inform negotiations for future ones, and indeed this was the case for our approach to Seattle. We do not, however, believe that delaying the benefits of trade liberalisation and WTO reform is justified on the grounds that further assessments of previous agreements are necessary. Both processes can be pursued in parallel. Environmental assessments of proposed agreements, such as the SIA which the Government and EU are committed to, clearly need to take into account the effect of trade agreements already in place. Regarding the role of the WTO, we do not believe that it would be possible to reach explicit agreement for the Organisation to conduct additional environmental appraisals or assessments given the opposition from a number of WTO members. However, we expect the WTO Committee on Trade and Environment to provide a forum for discussing environmental assessments conducted by WTO Members and others.

Openness and coordination

(j) We urge the Government to press, through the EU, for continued efforts by the WTO and its members to engage with other international institutions and civil society in the debate over the best way to improve the multilateral trading system's contribution to sustainable development. One proposal we have heard of merit is for there to be a parliamentary assembly associated with the Organisation as there is with a number of other multilateral institutions such as NATO, the OSCE and the Council of Europe. With respect to engagement with other international bodies, we regard the establishment of coordination mechanisms between the WTO and other global economic, development and environmental institutions to be a priority.

20. See paragraph 3. We agree strongly with the Committee on the need for improved engagement with civil society, and improved coordination between the WTO and other international institutions. As at Seattle, we will continue to press for measures to achieve these objectives. The Government supports greater openness in WTO procedures, including timely and more routine release of WTO working documents and consideration of ways to improve transparency in the Dispute Settlement process. We recognise that a large part of the responsibility for transparency on trade matters rests with national governments. The UK, for its part, is committed to consulting with civil society on issues on the multilateral trade agenda. As part of this commitment, the UK Government included three non-governmental representatives as part of its delegation to Seattle. Daily briefings by UK Ministers were held with, and were commended by, accredited UK NGOs at Seattle. The Government shares the Committee's concern for improved coherence and coordination between the WTO and other international organisations, and has argued for some time that greater cooperation was needed between the WTO and the United Nations Environmental Programme (UNEP). An important step in this direction was taken on the eve of Seattle with a public exchange of letters between the WTO's Director- General and UNEP's Executive Director. The UK Government also strongly supports the new agreement in Seattle on coherence between the WTO, IMF and World Bank.

(k) In terms of parliamentary oversight we welcomed the Government's commitment to providing the House with ministerial statements before and after the Seattle summit but there was no commitment to even the possibility of a full debate [to give] the House a chance to express its opinion. In the case of the OECD MAI the Government said that it had never ruled out the possibility of a debate in the House "had the right circumstances arisen". We would like to hear the criteria for the 'right circumstances' in relation to the Millennium Round. We regret that the House has been asked to approve the Government's proposals for Seattle, on the back of taking note of the European Commission's position, without a full debate in the Chamber and in advance of the promised ministerial statement.

21. The Government attaches great importance to keeping Parliament fully informed of developments on multilateral trade negotiations. The Committee will be aware that a full debate was held in the House on 9 December 1999, immediately following the Seattle conference.

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