This is from a Draft Ministerial Decision submitted by the U.S. under the title "Advancing Sustainability Goals through Trade Rules to Level the Playing Field":
Believing that no Member should gain a comparative advantage in trade due to insufficient or unenforced environmental laws, regulations, and standards;
...
Recognizing that the value of a subsidy is not the cost of the subsidy to the granting government but the benefit received by an industrial entity;
Realizing that industries located in certain countries benefit from weak or unenforced environmental laws and regulations by not being required to incur, and properly internalize, the costs of preventing or remediating environmental damage resulting from their production processes;
Recalling that the Agreement on Subsidies and Countervailing Measures (ASCM) permits Members to impose a countervailing duty to offset a government subsidy benefit received by an exporter to ensure that domestic producers should only have to compete with those other firms that are subject to the same competitive market conditions;
Accepting that imposing countervailing measures on subsidies that take the form of weak or unenforced environmental standards would promote stronger environmental standards and enforcement, would encourage the proper internalization of environmental costs into the calculations of production costs, and would correct policies that create transaction-specific market inefficiencies which thereby distort trade;
Decides as follows:
1. The failure of a government to adopt, maintain, implement and effectively enforce laws and regulations that ensure environmental protections at or above a threshold of fundamental standards shall constitute an actionable subsidy under the ASCM.
2. If an industry disproportionately benefits from pollution controls or other environmental measures set below a threshold of fundamental standards, a Member may impose a countervailing duty equal to the benefit received by the industry when the goods from such an industry enter the Member's customs territory.
I have some questions about all this.
First, while developing countries may be the intended target, isn't it likely that these provisions would be used against the U.S.? I don't think of the U.S. as having the highest level of environmental regulation. Wouldn't the Europeans and others make use of this to impose CVDs on U.S. products? I'm thinking of agriculture products in particular. "Environmental protection" and "environmental measures" seem like pretty broad terms, and it seems likely this could be applied to a wide range of U.S. farming practices.
Second, what specific impact would this decision have on the interpretation of the SCM Agreement? Would it override the requirement that there be a financial contribution, benefit, and specificity? That is, if you prove that the conditions in 1 and 2 exist, you can countervail?
And finally, if your goal is sustainability or environmental protection, are tariffs really the way to get there? It seems likely there are more effective approaches.
