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    Environmental Trade Barriers: Who Wins, Who Loses, What's the Score?


    Interview with Friedrich von Kirchbach
    © International Trade Centre, International Trade Forum - Issue 1/2001 

    Environment and trade is a challenging issue that the World Trade Organization (WTO) has to tackle. The scarcity of statistically well-grounded information makes the task even more complex. Using market analysis tools developed by ITC with data derived from the United Nations COMTRADE database and UNCTAD's database on trade barriers, a pioneering study to be published later this year tries to put some figures into the debate.

    Q: Many environmental advocacy organizations feel the WTO's rules have put a straitjacket on efforts to protect the environment by restrictions on harmful trade. What does your study show?

    A: As you know, WTO rules clearly permit countries to put up trade barriers for environmental reasons. The questions we tried to answer are: how widely are such sanctions applied, for what products, and what are their effects? Of 4,917 products we examined in world trade, we found only 1,171 that do not face any environmentally-related trade barriers (ETBs). The 3,746 other products - that do face barriers in at least one importing country - accounted for 88% of world merchandise trade (i.e. not including services) in 1999. You could say that the vast majority of international trade consists of products potentially affected by ETBs.

    Q: That seems an awful lot.

    A: We are not suggesting that 88% of products traded internationally directly face such barriers. The value of trade directly affected by ETBs, in fact, is US$ 679 billion - 13% of world trade. Of the 3,746 products I mentioned, 86% of the value of world exports bypasses these barriers. That means exporters focus their shipments on markets free of restrictions. To look at the situation from another perspective, a 1999 WTO study indicated that of the 2,300 notifications of measures under the Technical Barriers to Trade (TBT) Agreement, about 11% were environmentally related.

    Q: But are these really environmentally-related measures? Developing countries have complained - some formally to WTO - that some industrial nations are using environmental protection to impose disguised protectionism.

    A: We took a practical view. It does not really matter for the exporter whether injury to the environment is truly ascertained or whether a measure is protectionism in disguise. What matters is whether traders can export.

    Q: Then there is the question of how widely such ETBs are applied - in just one country or across a wide spectrum, for example.

    A: We divided products into three categories: products for which none of the 134 main importing countries of the world has introduced an ETB; those for which at least one country has imposed an ETB; and products for which at least 25% of world imports in value are directly affected by ETBs (irrespective of the number of importing countries applying such measures). This last category we term "widely-affected products".

    We found 44 products for which 90% or more of world trade was directly affected by ETBs. These products accounted for

    US$ 41 billion - about the size of all Finnish exports or half the size of Ireland's. We found 258 products for which more than half of world trade was subject to ETBs. Their combined trade value was US$ 238 billion - 4% of world trade in 1999.

    Q: Where were the ETBs found?

    A: Peaks of ETB protection appeared in particular for food items and for plants, bulbs and cut flowers. For all these products, at least 90% of world trade was subject to ETBs in 1999.

    Q: And the most affected product?

    A: Boneless bovine cuts - US$ 5.2 billion from US$ 5.4 billion of international trade: a coverage ratio of 97%. However, the peaks are not limited to agricultural products. Large automobiles are the major non-agricultural product in our listing: US$ 57 billion out of US$ 81 billion, an 81% ratio. Trucks, smaller automobiles and motor vehicle parts appear prominently in other ETB bands (leading the 70-80%, 50-60% and 10-20% bands of trade value respectively).

    Q: What are the other major products affected?

    A: We have listed 100 in all. The most prominent are coniferous lumber, natural gas, footwear, medicines and telephones.

    Q: These products do not seem to fall into the usual interpretation of environmentally sensitive products.

    A: We needed to look at the whole range of environmentally-related trade barriers, that is, all the reasons that could be invoked - meaning meas-

    ures introduced by an importing country to protect the health and safety of wildlife, plants, animals and humans as well as the environment generally - all of which are possible under WTO rules.

    The environment in its strictest sense accounts for a limited part of the restrictive measures imposed. But it would not have made much sense to limit ourselves to those, since exporting countries are concerned about the whole range. What must be underscored, though, is that protection of wildlife, although concerning a limited number of affected products, is associated with the highest degree of restrictiveness in the barriers imposed. Eco-labelling affects up to 1,400 products, accounting for US$ 251 billion in trade.

    We also needed to look at the whole spectrum of ETBs that could be applied, not simply bans on imports: customs surcharges, additional charges, internal taxes levied on imports - these are known as para-tariff measures in UNCTAD; finance measures (advance payment requirements, multiple exchange rates, transfer delays, etc.), automatic licensing measures (automatic licence, prior surveillance), quantity control measures (non-automatic licensing including prior authorizations, quotas, prohibitions, export restraint arrangements, enterprise specific restrictions); monopolistic measures (single channel for imports, compulsory national services); and technical measures (technical regulations, pre-shipment inspection, special custom formal-ities, obligation to return used products, obligation on recycling).

    ETBs may fall into all these categories. Finance measures, for instance, may refer to refundable deposits for sensitive products. Quotas to protect the environment according to the Montreal Protocol (to protect the ozone layer) would fall under quantity control measures. In total, 115 measures for environmental reasons potentially affect international trade; however only 43 measures are effectively imposed by importing countries.

    Q: Who is most affected by these ETBs?

    A: The implications from our study are quite clear: exporters from the 49 least developed countries (LDCs) are significantly more exposed to ETBs than those from any other group. Though only half of the LDC exports consist of products potentially affected by ETBs, among these products some 40% are directly affected, compared to less than 20% for developing, transition and developed countries. These poorest countries of the poor may have to face even tougher hurdles in the future as a result of growing environmental concern worldwide. This is especially the case for agricultural products that are among the most exported products by LDCs.

    Friedrich von Kirchbach and Mondher Mimouni of ITC carried out the study for a chapter of the World Economic Forum's Global Competitiveness Report with Peter Cornelius of the World Economic Forum. For more information, contact F. von Kirchbach, Chief, ITC Market Analysis Section, at vonkirchbach@intracen.org