2002 November 15 - Can the WTO and the Kyoto Protocol Co-exist? http://www.uscib.org/index.asp?

documentID=2374

Can the WTO and the Kyoto Protocol Co-exist?

Some assert that, in shunning the climate agreement, the U.S. gets an unfair
advantage, according to a new study

New York, N.Y., November 15, 2002 – Is the Kyoto Protocol on curbing greenhouse
gas emissions compatible with international rules under the World Trade Organization?
A paper issued today by a leading industry group raises troubling questions concerning
recent WTO rulings and their possible application to climate policy.

The study, by the United States Council for International Business (USCIB), asks
whether countries might decide the U.S. has an unfair trade advantage by not adhering
to Kyoto. USCIB cites statements by the European Union, Greenpeace and Friends of
the Earth suggesting that U.S. exports might be sanctioned under WTO rules as the
result of U.S. non-compliance with Kyoto, since U.S. energy costs would presumably be
deemed "unfairly" low.

"This issue has the potential to cause an absolute train wreck in the rules-based
international trading system," said Timothy E. Deal, USCIB's senior vice president in
Washington, D.C. "There is a crying need for WTO members to come to grips with the
intersection between multilateral environmental agreements like Kyoto and established
WTO rules to liberalize trade."

Last year. the Bush administration signaled U.S. unwillingness to ratify the Kyoto
Protocol, which the U.S. signed in 1997 and which sets limits on emissions of
greenhouse gases, citing unreasonable targets and possible harm to the U.S.
economy. Despite the U.S. position, enough countries have ratified the protocol so that
it will enter into force if Russia follows through on its recent commitment to ratify.

The USCIB study looks at pre-existing GATT/WTO jurisprudence on trade and

environment as well as recent WTO rulings such as the 1998 Shrimp-Turtle decision.
That ruling may have opened the door for the use of trade measures to promote
environmental objectives based on the way a product is made, according to USCIB.
Under certain interpretations of WTO rules, there is also the possibility that
countervailing duties might be applied to correct for "imbalances" in the production
process.

The USCIB paper also suggests that the U.S. may in fact be bound by Kyoto's
provisions even if it does not ratify the agreement. Under the Vienna Convention on the
Law of Treaties, countries are obliged to refrain from acts that would defeat the purpose
of treaties they have signed but not yet ratified.

“American exporters, regardless of their own or the U.S. government's position on the
Kyoto agreement, have an interest in ensuring that discrepancies or areas of overlap
between multilateral agreements do not fester so as to become irritants or impediments
to trade," said USCIB's Mr. Deal.

USCIB promotes an open system of global commerce in which business can flourish
and contribute to economic growth, human welfare and protection of the environment.
Its membership includes some 300 leading U.S. companies, professional services firms
and associations whose combined annual revenues exceed $3 trillion. As American
affiliate of the leading international business and employers organizations, USCIB
provides business views to policy makers and regulatory authorities worldwide and
works to facilitate international trade.

1 of 1 06/02/2006 23:01