Martial Arts: "Concerns Over Increasing Environment-Related Trade Disputes... Attention Needed on Trade Norms"

Data provided by Korea International Trade Association

[Asia Economy Reporter Kim Heung-soon] Since the COVID-19 pandemic, global interest in environmental issues has increased, and attempts to combine environmental and trade policies have become more active, leading to concerns that trade disputes related to these issues may rise. Accordingly, it has been pointed out that Korean companies need to closely monitor environmental and trade issues.

On the 25th, the Korea International Trade Association's Institute for International Trade and Commerce analyzed in its report titled "Environment, from the Periphery to the Center of Trade: Environmental Provisions in Trade Agreements and Their Implications" that many countries, including the United States and the European Union (EU), are strengthening provisions that mandate the implementation of environmental agreements within bilateral and plurilateral trade agreements. Obligations within trade agreements carry significant binding force, as violations can lead to trade restrictions against the offending party.

The report stated that recent trade agreements concluded by the US and the EU include more comprehensive and specific environmental provisions than before, with strengthened implementation obligations. The United States-Mexico-Canada Agreement (USMCA), which came into effect in July 2020, contains the strongest environmental standards among agreements signed by the US. The Biden administration intends to incorporate the Paris Climate Agreement implementation into the USMCA and strictly enforce environmental provisions. The industry is paying close attention to how the US will address and cooperate on environmental issues with Mexico, Canada, and others in the future.

The EU, which is promoting the introduction of a carbon border adjustment mechanism, has continuously developed environmental norms within trade agreements since it first included a chapter titled "Trade and Sustainable Development" in the Free Trade Agreement (FTA) with Korea in 2011. However, while it includes provisions on climate change response, it lacks compulsory enforcement mechanisms within dispute resolution procedures. Currently, the EU is delaying ratification of the trade agreement with Mercosur (the economic bloc of Brazil, Argentina, Uruguay, Paraguay, and other Latin American countries), citing Brazil's non-compliance with the Paris Climate Agreement, highlighting the growing importance of environmental chapters in trade agreements.

The World Trade Organization (WTO), whose role had weakened due to the suspension of the Appellate Body, is regaining its presence by promoting negotiations to harmonize trade and environmental norms. WTO member countries launched the Trade and Environmental Sustainability Structured Discussions (TESSD) in November last year, and aim to conclude negotiations on fisheries subsidies at the 12th WTO Ministerial Conference scheduled for November 30 this year.

Although there are no separate environmental provisions within multilateral trade rules, Article 20 of the General Agreement on Tariffs and Trade (GATT) includes an exception clause that allows limited trade restrictions necessary for environmental protection. The Korea International Trade Association analyzed that through interpretations and precedents related to disputes over this exception clause, arguments have gradually developed in a direction that broadens the scope of permissible environmental measures.

Seol Song-yi, a research fellow at the Korea International Trade Association, advised, "The government should establish Korea’s position considering the competitiveness of our industries and ensure that our stance is properly reflected in multilateral trade and environmental norm discussions. Companies need to recognize that environmental trade norms and disputes can directly or indirectly affect their activities and profits, and should pay attention to and prepare for related issues."

This content was produced with the assistance of AI translation services.