CIESIN Reproduced, with permission, from: U.S. Office of Technology Assessment. 1992. Trade and the environment: Conflicts and opportunities. Report no. OTA-BP-ITE-94. Washington, D.C.: Government Printing Office.

Box 2-A--The European Community and Trade/Environment Issues

The European Community (EC) so far has needed to address trade/environment interactions more directly than the rest of the world. For trade among EC member countries, the EC's Treaty of Rome and subsequent legislation and regulation supplant and go further than GATT in promoting liberal trade. The EC, as a customs union, has a common external tariff, has eliminated tariffs among its members, and has reduced nontariff barriers. To complete unification of its internal market, the EC is harmonizing health, safety, and environmental regulations so as to reduce competitive imbalances among EC countries and to keep regulations from acting as trade barriers. One result has been more EC-wide environmental regulation.

While the EC has been an innovator in resolving conflicts in trade, industry, and environmental policy, its approaches often are not easy to transfer to groups of nations that act more independently, or where the differences in development and national wealth are much greater. However, the EC's progress suggests that other countries might benefit from more coordinated efforts and a stronger institutional framework to deal with trade/environment interactions.

The Development of EC Environmental Regulation

In the early 1970s, the EC launched an "environmental action programme" that paved the way for future environmental initiatives. Since 1973, four environmental action plans have been adopted; the fifth is being drafted. The EC attempts to regulate water, air, chemicals, site safety, environmental assessments, waste, and wildlife.[1]

The 1987 Single European Act marked another milestone in the evolution of the EC's role in environmental protection.[2] The EC now works to harmonize regulations to meet environmental objectives as well as to eliminate technical barriers to trade. The act states that the EC has the power to make environmental laws when environmental protection can be achieved better through EC-wide action than through individual country action. Although the EC Council of Ministers agreed in 1990 to create a European Environment Agency (EEA), the agency has yet to be set Up.[3] Initially EEA will collect data and may assist in the monitoring of compliance.

A major environmental achievement of the Maastricht Summit (a December 1991 meeting aimed at promoting close political union within the EC) was agreement for a Cohesion Fund. Other EC funds are slated to provide $1.44 billion between 1989 and 1993 for environmental projects in less developed regions.[4] The Cohesion Fund, which is supposed to be established before the end of 1993, will provide more help to the EC's poorer members (Ireland, Greece, Portugal, and Spain) for environmental and infrastructural improvements. Details of the fund still have to be negotiated. The Maastricht Summit also made it harder for countries to veto EC-wide environmental regulation in some cases, but not in as many as the Environmental Commissioner had hoped for.[5]

General EC Environmental Regulation

The EC has adopted nearly 300 directives and regulations specifically concerned with the environment.[6] The EC has also taken the lead in considering measures to reduce greenhouse gas emissions. The EC Commission informally proposed to the Council of Ministers that legislation be drafted to limit carbon dioxide emissions by various means, including an energy tax worth the equivalent of $10 per barrel of oil by the year 2000.[7] Half of the tax would be a general levy on energy generation; the other half would be a tax on fuel's carbon content. Such a tax could put energy-intensive EC industries at a substantial disadvantage relative to foreign competitors. To address this problem, the Commission proposed to partially or totally exempt energy-intensive industries from the tax; so far, it has not proposed levying an equivalent tax on imports as an alternative. The Council of Ministers has asked the Commission to prepare draft legislation.

EC environmental regulation has tended to be harmonized at relatively stringent levels.[8] Also, members may regulate at a more stringent level than is established at the EC level, but not lower.[9] Higher levels of regulation in individual nations are permitted as long as they are taken for noneconomic, environmental reasons. For regulation of polluting processes (rather than of products), the regulation's motivation is usually not an issue. Countries with weak regulations have been given time to adjust their standards upward to the harmonized level and are provided with technical assistance. The Council will grant some nations temporary exceptions or financial support from the Cohesion Fund.

Even with assistance it has been difficult to implement EC-wide regulations. EC members have been slow to implement, or have even ignored, EC directives[10]. Part of the explanation may be the limited experience some EC members have with environmental regulation. Also, it can be difficult to change existing national laws to conform with EC requirements. The EC has limited enforcement mechanisms other than public pressure. The Commission tries to persuade transgressors to comply. It can bring a case to European Court of Justice (ECJ). But these mechanisms are not always adequate.

Harmonization of Product Regulations and Standards

The EC has focused much attention on the harmonization of product standards, many of them related to environmental protection. One reason for this is that product regulations can be abused to create barriers to imports.

Prior to 1985, the EC attempted to harmonize technical regulations for products at a very specific and detailed level. It sometimes took several years to work out disagreements between countries about a single product regulation. By the time a regulation was passed, it could be obsolete. The EC now focuses on broader performance standards. This approach ensures a certain level of environmental protection, imposes similar costs on all manufacturers within the EC, and prevents different national requirements from impeding trade.

Where national regulations still differ, the EC is grappling with the question of how to handle regulations with more adverse effect on trade than is justified (see ch. 3). If a member country suspects that environmental policies are a guise for protectionism, it can ask the Commission to investigate. If the Commission cannot negotiate a solution, the dispute can be brought to the European Court of Justice.

ECJ may decide that the country is imposing an unjustified technical barrier to trade, and require the country to permit foreign imports. However, the Court may decide in a given case that the burden put on trade is justified by the national regulation's contribution to environmental goals. In this case the country could reject nonconforming products. This happened with the Danish bottle bill, where the Court upheld the requirement under Danish law that beer and soft drinks be sold in returnable containers, even though that requirement restricted trade (see app. A). ECJ will likely see more such cases.

In cases where different regulations produce a trade dispute, the EC may decide to regulate the product at the EC level and take action to harmonize regulations. In some cases the EC appears to be trying to adopt the stronger standard EC-wide. For example, after Germany promulgated national laws regarding packaging that raised concerns over possible barriers to trade, the EC is now drafting EC-wide packaging rules.[11]

1 For an overview of EC environmental policy formulation, adoption, and implementation, see Cameron Keyes, The European Community and Environmental Policy: An Introduction for Americans (Baltimore, MD: World Wildlife Fund Publications, 1991).

2 Nigel Haigh and Konrad von Moltke, "The European Community: An Environmental Force," EPA Journal, vol.16, No.4, July/August, 1990.

3 The United Kingdom, whose turn it will be to assume Presidency of the EC in the later half of 1992, has promised to make the launching of the new agency a priority. International Environment Reporter, "Creation of EC Environment Agency GivenTop Priority by U.K.Minister," Jan. 29, 1992, p. 32.

4 Office for Official Publications of the European Communities, "Environmental Policy in the European Community," 4th Ed., March 1990, p.25. These funds are primarily channeled through the EC's structural funds: the European Social Fund, the European Agricultural Fund, and the European Regional Development Fund.

5 "EC Commissioner Says Maastricht Summit Fell Short in Environmental Policy Areas," International Environment Reporter, Dec. 18, 1991, p. 670.

6 Keyes, The European Community--Environmental Policy, op. cit.

7 "A Commumty Strategy to Limit Carbon Dioxide Emissions and To Improve Energy Efficiency," sec(91) 1744 final, released Oct. 14, 1991.

8 Charles S. Pearson and Robert Repetto, "Reconciling Trade and the Environment: The Next Steps," paper prepared for the Trade and Environment Committee of the Environmental Protection Agency's National Advisory Council on Environtnentat Policy and Technology, December 1991, pp. 11-12.

9 The Couucil of the European Communities, The Single European Act, op. cit., Title VII, Article 130 T, 1986.

10 As of early 1990 the European Commission had identified 303 cases in which member nations had incorrectly or incompletely implemented EC environmental directives. Hilary F. French, "The EC: Environmental Proving Ground," World Watch, November/December, 1991, pp. 26-33. See also Environmental Commissioner Ripa di Meana in 1990, as quoted in Keyes, The European Community and Environmental Policy, op. cit., p. 7.

11 "Final Draft Being Readied of Plan to Curb Packaging Waste, Officials Say." International Environmental Reporter, vol. 15, No.3., Feb. 12, 1992, p. 73.