Practical Challenges in Negotiation for Environmental Provisions under RTAs MIYAKE, Yasujiro METI, Japanese Government 19 June 2007 Presentation for OECD workshop on Regional Trade Agreements and the Environment

1 Singapore (2002) Mexico (2004) Malaysia (2005) Philippines (2006) Chile (2007) Thailand (2007) Cooperation in the field of environment Implementing agreement Art. 31 Art. 147 Inc. CDM, environmental goods and services, business alliances Art. 140 (g) Inc. CDM, environmental goods and services Art. 144(d) Joint statement Art. 9(iv) CDM, business alliances Joint statement Att. 3. No. 6 Art. 153(f) (inc. CDM) Not to relax environment measures as an encouragement for investment Art. 74Art. 90Art. 102Art. 87Art. 111 Working group on environment Working Group on Energy and Environment Implementing agreement Art. 36 Subcommittee on Science, Technology, Energy and Environment Implementing agreement Art. 46 Reaffirming intention to pursue high level environment protection to fulfill its international commitments Joint statement Att.3 No.1 Harmonising its environmental laws and regulations with its international commitments Joint statement Att. 3. No.2 Promote public awareness Joint statement Att.3. No.5 Transboundary movements of hazardous waste Press releaseExchange of letters between Ministers of Foreign Affairs Evolving environmental provisions of Japanese RTAs

2 Major environmental elements to discuss 1.Strict control over transboundary movement of hazardous wastes 2.Environmental goods & services (1)Market access (2)Government procurement 3.High-level environmental protection as improvement of investment conditions (1) Not-to-relax clause (2) Effective enforcement (3) Promotion of public awareness (4. Cooperation) (5. Working group) Challenges? (1) Intra-governmental (2) With negotiating partners

3 Element 1: Strict Control over Transboundary Movement of Hazardous Wastes Typical criticism based on misunderstandings RTA aims to promote exportation of hazardous wastes. Complaints from NPOs in e.g. the Philippines, Thailand, & India

4 Element 1: Strict Control over Transboundary Movement of Hazardous Wastes 1.Tariff reduction is not directly connected with this issue. -Tariff classification at the customs authority does not correspond with the Basel definition of wastes. -Some tariff classification may be more likely to include wastes (e.g. HS Sewage sludge, HS Clinical waste), but the WTO Agreement provides that tariffs must be eliminated on substantially all the trade (GATT Art.24(8)). Japanese government never intends to promote trade in hazardous wastes by way of tariff reduction. Need for clarification on our position: Strict control under the Basel Convention should address the concern.

5 Element 1: Strict Control over Transboundary Movement of Hazardous Wastes 2.Japanese government implements strict control over hazardous wastes under the Basel Convention. -No exportation is allowed unless METI approves, MOE confirms, and the importing country gives a written consent. -The government holds explanatory sessions for industries on Basel Conventions and relevant regulations. -The government also holds workshops with Asian countries to exchange information in order to prevent unlawful trade in hazardous waste. Need for clarification on our position: Strict control under the Basel Convention should address the concern.

6 Element 1: Strict Control over Transboundary Movement of Hazardous Wastes 1.Better internal coordination may be necessary for greater accountability. -Relevant sections are split and spread: customs authority, foreign embassies, MOFA, MOE, METI (sections for Basel Convention, RTA, chemical industry etc.) -An occasion at the Asia-Pacific Regional Meeting on the Strategic Approach to International Chemicals Management (SAICM) in May 2007 Challenges:

7 Element 1: Strict Control over Transboundary Movement of Hazardous Wastes 2.RTA negotiating partners may need some time to get familiar with the issue. -Mandates to negotiate on environmental issues are crucial. Some developing countries shut the door to discuss environmental issues from the beginning. -Countries may refuse to negotiate on environmental issues from tactical viewpoint. Country A: - Country As Ministry of Environment once proposed to negotiate on environment protection with a dedicated chapter. - Later, its Ministry of Trade took control of the whole negotiation process and refused to negotiate on environmental issues. -Raising environmental issues at the early stage for intensive discussion (e.g. at a Joint Study Group) is essential. Challenges:

8 Element 1: Strict Control over Transboundary Movement of Hazardous Wastes 2.RTA negotiating partners may need some time to get familiar with the issue. -Having a dedicated chapter on environment itself is not the goal, but it may have a practical significance in securing slots for negotiation. -Normally negotiation groups are divided in accordance with chapters in the Agreement. (e.g. Trade in goods, Trade in services, Investment, Intellectual Property Rights) -In order to negotiate on environment, it is essential to include the issue at least in the Terms of Reference. Challenges:

9 Element 2: Environmental Goods & Services RTA may be an appropriate vehicle for better market access to environmental goods & services -Discussions on environmental goods & services are going on at the Doha Development Agenda at the WTO, but stuck on definition of environmental goods. -RTA bilateral relationship may provide better chance to agree on the definition of environmental goods. -Better market access to environmental services may also be discussed. Some developing countries may be competitive in providing environmental consultations. -Government procurement giving preference to environmental goods & services may be another item to consider.

10 Element 2: Environmental Goods & Services Challenges: 1.Governments are often reluctant to do something unprecedented. Possible counterargument: -Why only environmental goods? What about electronics, chemicals, automotives? (Cf. Sectoral initiative at NAMA/DDA at WTO, ITA, Chemical Tariff Harmonisation Agreement at the UR) -Why only environmental services? -If negative-list approach is adopted, environmental services argument may only work as a principle or guideline in the course of negotiation. -Request on environmental services may be made in case of positive-list approach. 2.Some negotiating partners find government procurement sensitive to discuss.

11 Element 3: High-level Environmental Protection as Improvement of Investment Conditions Not to Relax as an encouragement for trade & investment clause is often added. High-level environmental protection will serve for improving investment conditions. Promoting public awareness may also count. -Effective enforcement may be important. -METI pays more attention to investment condition improvement in RTA partner countries. - Cf. NAFTA side agreement on environment appears to aim at prevention of race to the bottom in lowering environmental regulations so as to become more trade competitive. Challenges: Some countries may need some time to see the benefit of investment condition improvement. Trade competition aspect may play more roles.

12 Some implications 1.Better exchange of views between the negotiating partners may bring about fruitful results especially in case of strict control over transboundary movement of hazardous wastes & high-level environmental protection as improvement of investment conditions. 2.Discussions at an early stage e.g. at a joint study group are important. This will also lead to mandates to negotiate. 3.Greater accountability toward the public, including NGOs, will help in smooth negotiation/implementation. Better coordination within a government may be useful.