National Incentive Measures to Protect Biodiversity and Compliance with WTO Agreements

Executive Summary

 

1. This memorandum offers a case study identifying two concrete cases in which Brazil and Switzerland have designed and implemented positive incentive measures to promote the trade of biodiversity related products and services in line with the objectives of the Convention on Biological Diversity (CBD).

 

2. This memorandum will analyze the tax incentive measure enacted by the State of the Amazonas in Brazil, and the Swiss taxation Regulation on the sustainability of biofuels. These measures will be analyzed on their WTO compliance to offer a better insight into the obligations under WTO law and the interplay between the two different Agreements.

 

3. The positive incentive measures whose adoption is stimulated by the CBD could potentially lead to WTO inconsistencies. This memorandum will focus upon the question whether the Swiss and Brazilian measures create inconsistencies with WTO law, and if so to what extent the CBD can be invoked to avoid any violations.

 

4. The CBD could be taken into consideration by a Panel in the application of the WTO law, as the US-Shrimp case demonstrated, as an element of context for the interpretation of the meaning of the provisions of the WTO, and therefore include the conservation of the biological diversity into the general exception of GATT Article XX. Since the report of the Panel of the EC - Biotech case, has neither been uphold by the AB (yet) nor is incontestably acceptable, it can be argued that a direct inclusion of the biodiversity protection and conservation into the scope of the Article XX GATT exception is still possible.

 

5. Most positive incentive measures will be based on (non products related) product and process methods. Where in the past, these did not seem to be enough reason to allow for distinctions to be made between products, the recent EC – Asbestos case law seemed to indicate that, if

PPMs affect the competitive relationship between two products, a specific PPM will become relevant in the likeness determination. They can be analyzed under consumer preferences or otherwise they could be reflected in market. This would allow for distinctions to be made between for example fuels, based on their production process and the environmental impact thereof. Furthermore, the differential treatment of like products may not necessary result in less favorable treatment. In the recent EC-Biotech case for instance, the Panel did not found that there was less favorable treatment, because the difference of treatment was based on another factor, namely human health protection and not the origin of the products. This reasoning might also apply to measures based on environmental protection, pursuant to the CBD Agreement. Thus, the CBD might play a role in the analysis of a WTO dispute under the exceptions of GATT Article XX or might influence the analysis under GATT Article III with regard to market perception (consumer preferences) or less favorable treatment.

 

6. The Swiss measure most likely complies with the TBT Agreement, the SCM Agreement and the GATT Agreement. It is only in very specific circumstances that a violation might be found, depending on the application of the measure. The Brazilian measure might constitute a violation of the SCM Agreement. However, this, as well as any potential violation of the GATT, might be justifiable under GATT Article XX(b) and (g). It is in any case very important to respect all the provisions regarding cooperation with other WTO Members.

 

7. This memorandum will first give a brief overview of the CBD and its relationship with the WTO, followed by a number of cross-cutting issues that are of relevance to all positive incentive measures. The second part of the memorandum will offer an outline and overview of the obligations under the TBT Agreement, the SCM Agreement and the GATT Agreement (GATT). After each Agreement, both the Brazilian and the Swiss measure will be analyzed on compliance. Finally, the exceptions contained in Article XX GATT will be examined.

 

Read the full memo here

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