Protecting the Environment at the World Trade Organization: the Eventual ‘Greening’ of Trade?

This post is the result of work conducted for the ILA Committee on Sustainable Development and the Green Economy in International Trade Law.

In a recent post, Diane Desierto discussed the Port State Measures Agreement (‘PSMA’) and its role in attempting to combat illegal, unregulated, and unreported (‘IUU’) fishing. Aside from the numerous interesting aspects of the PSMA identified in that post, the Agreement is also expected to play a key role in regulating IUU fishing beyond the law of the sea. At the World Trade Organization (‘WTO’), members are currently in negotiations to prohibit the use of subsidies which contribute to IUU fishing, as well as those that contribute to overfishing or overcapacity. While the elimination of fisheries subsidies which contribute to IUU fishing have been on the agenda of WTO members since the Doha Declaration in 2001, little progress has been made. The adoption of Agenda 2030 and its 17 Sustainable Development Goals (‘SDGs’) in 2015 has changed this, giving new energy to the international community to achieve a specific set targets. Of most relevance here is SDG 14.6 which requires

‘by 2020, prohibit certain forms of fisheries subsidies which contribute to overcapacity and overfishing, and eliminate subsidies that contribute to IUU fishing, and refrain from introducing new such subsidies, recognizing that appropriate and effective special and differential treatment for developing and least developed countries should be an integral part of the WTO fisheries subsidies negotiation.’

The objectives of SDG14.6 extend beyond subsidies that contribute to IUU fishing to include those that contribute to overcapacity and overfishing. Disciplining such subsidies raises a number of challenges for the WTO. While the regulation of subsidies is a standard feature of world trade law, fisheries subsidies present unique challenges. For example, where a member considers a subsidy to harm their interests, they have two options under the Agreement on Subsidies and Countervailing Measures (ASCM): through direct challenge under the WTO’s dispute settlement system, or through the imposition of countervailing duties as a self-help remedy which seeks to counteract the effect of the subsidy. In each instance, the rules on subsidies seek to avoid harm to members’ interests, understood (inter alia) as injury to domestic industry, lost opportunities in third markets, or nullification or impairments of benefits.

Fisheries subsidies, however, have a different effect. While they are covered by the ASCM, those rules are ineffective in disciplining them as, in most instances, fisheries subsidies do not cause negative trade effects. Instead, the negative impact of the fishery subsidy is the effect it has on fish stocks and the environment more broadly. As the principal remedy for subsidies (countervailing duties) are linked to the injury they cause to industry, which does not have an equivalent in this instance, the question arises – what form countermeasures should take? Further, how should the ‘contribution’ of the subsidy to such fishing practices be calculated? And how far should the disciplines extend – to a specific vessel, or all vessels owned by a single operator?

The Negotiating Group on Rules (‘NGR’) has been trying to tackle these challenges, and has made progress in presenting definitions, framing the scope of the new disciplines on fisheries subsidies, and their operation, as well ensuring that special and differentiated treatment (‘SDT’) is embedded in the process (as mandated by SDG 14.6). This final point raises a number of issues, as some members consider the problem of overfishing as the result of developed members’ large fishing fleets travelling to overfish stocks across the globe, rather than fishing practices in developing countries. While the evidence that such fishing is still common practice is lacking, the affiliated concerns of developing members to ensure that local small-scale artisanal fishing or subsistence fishing are protected has been central to the discussions.

To date there exist a number of proposals from the EU, New Zealand and others, Argentina and others, Indonesia, the ACP group, and the LDC group. Key has been the use of other legal regimes, particularly from the law of the sea, on which to build the WTO disciplines. For example, the definition of IUU fishing is to be taken from the 2001 FAO International Plan of Action on IUU fishing, which once incorporated into the new disciplines will become the reference point for WTO law. Similarly, regional fisheries maritime organizations (‘RFMOs’) are expected to play a core role as it is their lists of vessels engaged in IUU fishing that are to be presumed to be valid, as well as determining which stocks are overfished, while members’ own national authorities will also be able to make equivalent determinations on the basis of the best evidence available to them. The New Zealand and others proposal (at Article 1.1.2) would go further, classifying as prohibited subsidies those that contribute to any fishing for stocks in waters where the member is not a party to the relevant RFMO, an approach which chimes with the assumption that international fishing fleets are the primary causes of injury in this field.

The PSMA model whereby access to ports by vessels engaged in IUU fishing is denied (Article 9.4 PSMA) has been suggested as an approach under the disciplines on fisheries subsidies (see the New Zealand and others proposal, para 3.8). The exact mechanics of this under WTO law is unclear, in particular considering the obligations under Article V GATT on freedom of transit. Further, whether this will be the sole approach is not settled: direct challenge of a subsidies programme under the dispute settlement system would be comparatively straightforward but arguably less effective than the adaption of a form of CVD, perhaps calculated to the value of the subsidy irrespective of its impact on local fishing industries. Further, the extent to which countermeasures target not only vessels engaged in IUU fishing but also their operators is contentious. Note, that while most proposals identify vessels as including their owners, the Argentina & others proposal (in footnote 7) explicitly restricts responses to those vessels specifically engaged in IUU fishing. While the limitation of scope may be reasonable, there would be a considerable deterrent effect were all vessels of an owner or operator targeted on the basis of one vessel engaging in IUU fishing.

Beyond the question of IUU fishing, subsidies which contribute to overfishing or overcapacity present a further set of challenges. One of the most difficult arises from the jurisdictional scope of the disciplines. Some members have proposed an exclusion of the exclusive economy zone (‘EEZ’) from the application of the disciplines for developing members and LDCs (put forward in both the APC and LDC proposals). Indeed, it is here that some of the greatest difficulties lie: for members to consider their right to fish within their EEZ as unhindered by restrictions on subsidies is deeply problematic and would run counter to the objectives of SDG14.6 which does not contain limitations on the elimination of harmful subsidies to those that only affect stocks outside of a State’s territorial waters or EEZ.

From a broader perspective, it is interesting to note how the proposals would tie the WTO into fisheries management systems in a novel manner. A common thread throughout the proposals is their dependence on a legal network of fishing obligations (such as the PSMA), as well as relying on RFMOs to fulfil the monitoring or evaluation of fish stocks. While standard setting bodies have become integral to questions arising in technical barriers to trade and sanitary and phytosanitary measures, to rely on RFMOs and the structures of fisheries management will offer a new dynamic between the WTO and other international organizations. Given the limited ability of RFMOs to manage the high seas, and their their variable effectiveness more generally, this may well create substantial challenges. Yet, when confronted with limited alternatives, this may be a case of innovation to achieve the good rather than the best.

Should WTO members agree to disciplines to meet SDG 14.6 within the time scale required (it is hoped that substantial progress will be made at the Ministerial Conference this year in Buenos Aires), it would mark an extraordinary achievement. The WTO, which has long been maligned for its insensitivity to ‘non-trade’ concerns such as the environment, will have accomplished something that the FAO, UNEP, and UNCTAD have thus far failed to achieve among themselves, in spite of their enthusiastic lobbying. This is especially notable when one considers that the regulation of fisheries subsidies is not clearly a trade matter at all, but a genuinely environmental concern. It may well be that the long debates over the greening of trade law has unexpectedly found an outlet.