Environment and trade

International trade and the environment are physically, legally and institutionally interdependent upon one another. Natural resources provide the inputs and the energy required for economic output, whose waste is released back into the environment. The environmental impact of not only increased trade in goods and services, but also waste, around the world may require environmental protection measures that, in turn, have an impact on trade. Trade and the environment are regulated by two separate legal systems that interact with one another (World Trade Organization and free trade agreements, on the one hand, multilateral environmental agreements and national environmental regulations, on the other).

As concerns international trade, the environmental impact caused by the consumption of goods and services is distributed geographically across the entire value chain. In Switzerland, over 70 percent of the environmental impact of our consumption occurs abroad. Hence, environmental concerns must be taken into account by trade policy. This can be achieved, inter alia, through the promotion of ecological market transparency, the monitoring of the environmental compatibility of trade agreements and the improvement of environmental standards.

International regulations for trade and the environment

The overall objective here is to improve the coherence between the trade and environmental regimes. In particular, World Trade Organization (WTO) regulations should be designed in a way that ensures that they do not pose any obstacle to effective environmental protection. To achieve this goal, certain WTO regulations and mechanisms require further clarification and adaptation.

Specifically, a systematic approach should be adopted with regard to the relationship between multilateral environmental agreements (MEAs) and the WTO regulations. Moreover, the general WTO exceptions contained in the various agreements, in particular the General Agreement on Tariffs and Trade (GATT), General Agreement on Trade in Services (GATS), Technical Barriers to Trade (TBT), Sanitary and Phytosanitary Measures (SPS) and Trade-Related Aspects of Intellectual Property Rights (TRIPS), should be further clarified in relation to the precautionary principle. This principle enables the designation of measures for avoiding irreversible environmental damage, including in cases about which scientific uncertainty prevails

Switzerland includes provisions on the environment in the bilateral and free trade agreements it has concluded under EFTA with a view to better co-ordinating trade and environmental regulations. The OECD explicitly recommends that environmental concerns be taken into account in free trade agreements. It is possible to observe that many countries follow this recommendation.

Prerequisites for more ecological trade system

One of the aims of the WTO’s Doha Development Round was to promote the global dissemination of environmental innovations and expertise through the liberalisation of the trade in environmental goods (products that protect or support the environment) and services. This liberalisation, which was unable to be achieved within the WTO framework, has been negotiated since 2014 by a group of 17 countries (including Switzerland) outside of the organisation. The sought-after agreement, known under the acronym EGA (Environmental Goods Agreement), concerns a list of goods (that will be updated regularly) and the terms and conditions of liberalisation. The negotiations have been suspended since December 2016 and will resume once all the participating countries have explicitly indicated their willingness to pursue them.

The trade in goods and services offers the potential for attaining a more efficient and sustainable use of resources. However, this requires clear information on the use of resources in production and consumption throughout the value chain. Such information should make it possible for products and services to be differentiated on the basis of their use of natural resources and hence provide a basis for decision-making by consumers and producers and by governments and organisations.

Enabling the establishment of this ecological market transparency requires a standardised international method for the measurement of environmental consumption and global acceptance by the international trade system.

Process and production methods

Process and production methods (PPMs) must be analysed from the perspective of environmental relevance. The aim is for WTO members to be able to adopt trade-related measures that are considered non-discriminatory and non-protectionist even though they are based on PPMs (e.g. adoption of an environmental symbol or ecolabel). Another aim, finally, is to improve and strengthen cooperation between UNEP and other international environmental organisations and the WTO.

Trade and the green economy

As part of international green economy initiatives, international economic and environmental policy frameworks should be further developed so as to rectify market failures and increase resource efficiency in the economy. International trade is an integral component of the concept of a green economy and can make a decisive contribution to sustainable development if international trade regulations and mechanisms are designed in a way that takes effective account of environmental and social issues. Switzerland advocates this in its capacity as a member of the WTO (e.g. in the Committee on Trade and Environment), the OECD (e.g. in the Joint Working Party on Trade and Environment) and the EFTA, (e.g. in the negotiations on free trade agreements) as well as by implementing the related Sustainable Development Goals (SDGs).

The Green Economy Report, which was read by the Federal Council on 20 April 2016 and follows up the Green Economy Action Plan (2013), includes a measure aimed at assessing the environmental impact of the free trade agreements concluded by Switzerland, alone or under the EFTA (measure 7a in the report). The SECO, in close consultation with the FOEN, is responsible for deciding in each case whether such an assessment is necessary.