Quick Win No. 10
Build on existing trade agreements to support multilateral discussions on trade and environment
The role of trade in improving the environment and supporting the sustainable development goals has increasingly come into focus. The recent conclusion of the WTO Agreement on Fisheries Subsidies, the first multilateral agreement that made a significant contribution to advancing one of the SDGs, has shown what is possible when members align their efforts on trade and sustainability. Meanwhile, several free trade agreements (FTAs) have made considerable progress in incorporating environmental or sustainable development chapters which support greener trade. These avenues to advancing trade and environmental goals not only complement each other, but can also advance innovative rulemaking and dialogue.
Countries vary in their approaches on the nexus between trade and the environment, mainly due to a few key differences: how environmental goals are conceived, both prior to and after trade agreements are signed; the process of treaty ratification or implementation; the nature of the agreement’s enforcement mechanisms; and cooperative relationships forged between governments, international organizations and domestic regulators. At the same time, governments have tried to overcome these differences at the multilateral level in the WTO Trade and Environment Committee and some WTO members have also joined forces to advance work on sustainable supply chains, climate change, environmental goods and services and plastics pollution.
As these discussions evolve, there is plenty that can be learned from recent FTAs to guide these efforts. For example, in the United States–Mexico–Canada Agreement (USMCA), individuals and organizations of either party can file complaints to the North American Commission on Environmental Cooperation (NACEC) for alleged breaches of the agreement. The United States–Central America–Dominican Republic Free Trade Agreement (CAFTA-DR) adopts a similar approach, allowing for broad participation in the promotion of the enforcement process. In addition to enforcement, other FTAs have developed sector-specific rules to address particular environmental concerns. For example, the revised FTA template of the European Free Trade Association prioritizes sustainable management of trade in forestry products, fish, and wildlife, with precise commitments on certification schemes. This has spurred broader dialogue on the scope and design of sustainability provisions, in addition to their unintended consequences, such as trade diversion. Notably, the diffusion of environmental rules through FTAs is most effective in agreements involving developing countries. Since these countries require greater financial and technical support for environmental adaptation and mitigation, many FTAs have negotiated parallel cooperation agreements focusing on capacity building.
A recent study by the London School of Economics (LSE) Trade Policy Hub found that FTAs are a powerful channel for the diffusion of environmental norms and with a strong potential for further diffusion to the multilateral level. However, power asymmetries between countries can lead to the adoption of suboptimal policies that favor some markets over others. Therefore, while experimentation in FTAs is a valuable exercise, all innovations are not created equal. This is where the WTO comes in – it should continue to strengthen its role in sharing regional and bilateral experiences, and identifying best practices that could help inform plurilateral or multilateral efforts. In addition, members should pay attention to the experiences of developing countries and LDCs to better understand existing capacity constraints and fill the gap when necessary. Tackling trade and environmental challenges is a global problem, but solutions may emerge from trial and error. All efforts offer an opportunity to learn, and the WTO is best situated to collate those experiences and develop a broader agenda for sustainable trade.
