This workshop focused on key issues related to Regional Trade Agreements (RTA) and the environment. It had three main objectives: (i) to take stock of current experience and insights on RTAs and the environment from different stakeholders, and to establish a stakeholder dialogue on this topic; (ii) to investigate how RTAs can serve as a vehicle to advance a resource efficient and circular economy transition; and (iii) to explore the potential of RTAs in addressing the nexus of illegal trade and environmental crime

1. OECD WORK ON
REGIONAL TRADE AGREEMENTS
AND THE ENVIRONMENT
Rob Dellink
Senior Economist
Environment and Economy Integration Division
Environment Directorate
Special thanks to Shunta Yamaguchi
OECD Workshop on RTAs and the environment
10-11 June 2021, virtual meeting

2. Policy Landscape
 Environment and trade concerns are linked to a greater degree
as the world economy becomes increasingly integrated.
 Under the current backlash to trade, public acceptability of trade
agreements and trading relationships is paramount.
 Role of trade to achieve multilateral objectives is also essential.
 Sustainable Development Goals (SDGs)
 COP21 Paris Agreement
 Multilateral Environmental Agreements (MEAs)
 Important to secure the mutual supportiveness of trade and
environment policies
 Trade policies to support and do not harm the environment
 Environmental policies do not act as disguised protectionist measures.
 Ex-ante sustainable impact assessments (SIA) are also very
important 2

3. • Major study published in 2007
• Tracking typology
– 2008-14: Annual Updates
– 2008: Checklist for negotiators
– 2011: Framework for evaluation
– 2014: Trends and policy drivers
• Analysis of provisions and effects
– 2018: Assessing implementation
– 2018: Assessing effectiveness
• Securing policy coherence
– 2019 and onwards: Greening RTAs
• Workshops 2006-21
3
OECD’s work on RTAs and the Environment

4. Evolution of environmental provisions in RTAs
4
0
10
20
30
40
50
60
70
80
90
pre-2008 2008 2009 2010 2011 2012 2013 2014 2015 2016
General exceptions
Preamble
Co-operation
Specific environmental issues
Uphold environmental law
Implementation mechanism
Dispute settlement
Ex-ante impact assessment
MEAs
Public participation
OECD based on George (2014) Developments in RTAs and the Environment and George (2014) Environment and RTAs

5. How are environmental provisions implemented?
Largely unknown but some anecdotal evidence
• Strengthening of environmental laws and regulations
– Adopting new environmental laws, US-Chile, US-Morocco
– Adopting new EIA regulations, CAFTA-DR
• Introducing new institutional arrangements
– Creating a Ministry of Environment, US-Chile, US-Peru, US-Jordan
– Creating an Environmental Auditing Unit in Guatemala, CAFTA-DR
• Providing co-operation on improving env. law and enforcement
– Co-operation in creating a technical council on enforcement of env laws, CAFTA-DR
– Co-operation in creating a national strategy in Honduras, CAFTA-DR
– Co-operation with private sector on environmental standards, EU-Chile
– Co-operation in pollutant registry programme, CAFTA-DR
• Improving environmental awareness
– Uplifting public participation of Mexico’s civil society, NAFTA
5
Survey +
desk analysis
Source: George and Yamaguchi (2018) Assessing Implementation of Environmental Provisions in RTAs

6. How effective are environmental provisions?
6
Environmental
indicator
Effect of 1 additional RTA with
environmental provisions
Effect of 1 additional RTA without
environmental provisions
PM2.5 No statistically significant results (possibly due to limited data availability)
SO2 per capita Decrease 0.3% in short-run and
2.2% in long-run
Decrease 0.2% in short-run and
1.4% in long-run
NOx per capita Decrease 0.2% in short-run and
1.4% in long-run
Decrease 0.1% in short-run and
0.9% in long-run
• SO2 and NOx emission decreases are slightly more strongly related to the
number of RTAs with EPs than without EPs.
• However, difference between two columns was not statistically significant
(additional effect of EPs can’t be concluded with sufficient statistical certainty)
Source: Martínez-Zarzoso (2018) Assessing effectiveness of environmental provisions in RTAs
Empirical analysis 1970 - 2011

7. Greening Regional Trade Agreements
• Liberalise trade in environmental goods and
services
Trade in environmental
goods & services
• Enhance regulatory coherence on technical
regulations, standards and conformity
assessment procedures
Tech. barriers to trade
& regulatory co-op.
• Reform fossil fuel subsidies / transparency
• Identify non-actionable env. subsidies
Subsidies
• Analysis ongoing
Trade in services
7
Source:
van Asselt (2017) Climate change and trade policy interaction: Implications of regionalism
Yamaguchi, S. (2020) Greening regional trade agreements on investment
Yamaguchi, S. (2020), "Greening regional trade agreements: Subsidies related to energy and environmental goods
Bellmann and van der Ven (2020) Greening regional trade agreements on non-tariff measures
• Secure right to regulate + investor protection
• Promote green investment
Investment
Non-tariff measures

8. www.oecd-ilibrary.org/trade/oecd-trade-and-environment-working-papers_18166881
Trade and Climate Change
For further information…
OECD Trade and Environment Working Papers
8
RTAs and the environment
Trade and Environment
Indicators
Environmental
technologies
through trade
(Wind Turbines)
Trade and
Circular Economy

9. THANK YOU!
For more information:
www.oecd.org/environment/envtrade
www.oecd.org/trade/topics/trade-and-the-environment/
Rob.Dellink@oecd.org

10. Evolution of RTAs and environmental provisions
10
Source: Monteiro (2016) Typology of Environment-Related Provisions in RTAs

11. Preamble
1. General Definitions and Initial Provisions
2. National Treatment and Market Access
3. Trade Remedies
4. Technical Barriers to Trade
5. Sanitary and Phytosanitary Measures
6. Customs and Trade Facilitation
7. Subsidies
8. Investment
9. Trade in Services
10. Government Procurement
11. Intellectual Property
13. Environment, Sustainable Development
14. Cooperation and Capacity Building
15. Transparency
16. Exceptions
17. Dispute Settlement
18. Final Provisions
Coherence with other chapters & articles
11
ENVIRONMENTAL
OBJECTIVES
Regional Trade Agreement
Project on Greening RTAs
Investment
- Right to regulate for environment
- Green investment
Subsidies
- Environmentally supportive subsidies
- Environmentally harmful subsidies
Non-tariff measures
- Technical barriers to trade
- Regulatory co-operation

12. 12
ISDS cases related to environment
brought under RTAs, BITs & ECT (1987-2017)
Author based on italaw website (www.italaw.com)
Total cases: 855
Environmentally-
related cases: 75
(9%)
Trends of ISDS cases (1987-2017)
Total cases
Environmentally-related cases

13. 13
ISDS cases related to environment
brought under RTAs, BITs & ECT (1987-2017)
32
34
11
2
28
50
17
76
8
35
534
44
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
RTAs
BITs
ECT
Environmentally-related cases (based exclusively on official documentation)
Environmentally-related cases (based exclusively on unofficial documentation)
No information
Non-environmental cases
Author based on italaw website (www.italaw.com)

14. • Securing robust investor protection and policy space for environmental regulation is
key to ensure policy coherence in trade and investment agreements.
• Careful drafting of the scope of substantive investor protection provisions would
support the state’s ability to adopt measures to protect the environment, such as:
– reaffirming the right to regulate including for the environment;
– careful drafting of investor protection provisions (e.g. fair and equitable treatment, indirect
expropriation)
– strong commitment to transparency.
• Promoting green investment through trade and investment agreements is an area
with less experience - a few examples:
– commitments for green investment in the preamble;
– environmentally responsible investment in reference to domestic regulations and
internationally available standards (e.g. OECD MNE Guidelines).
– environmentally supportive investment through home-state obligations and co-operation
and capacity building of investment promotion agencies.
14
Greening RTAs on investment - main findings
Source: Yamaguchi, S. (2020) Greening regional trade agreements on investment, OECD Trade and Environment Working Papers, https://doi.org/10.1787/4452a09d-en.

15. • Environmental objectives can be incorporated in chapters and articles on subsidies:
– Prohibiting the use of local content requirements in RTAs:
• for renewable energy development (e.g. EU-Singapore FTA) or in general
• by reaffirming WTO rules or additional disciplines (services, qualitative requirements)
– Agreeing on a list of non-actionable subsidies
• for environmentally supportive subsidies (e.g. CARICOM Agreement)
– Increasing transparency of environmentally supportive and harmful subsides:
• include commitments, align with WTO, OECD, or SDG Indicator 12.c.1 process (FFS)
• make commitments subject to dispute settlement mechanisms (e.g. EU-Korea FTA)
15
Greening RTAs on subsidies for energy and
environmental goods - main findings

16. • Options to minimize the risks of suboptimal environmental outcomes
– Environmental protection as one of the objectives or regulatory co-operation
– Incorporating the environment in RIA or ex post evaluations
– Introducing non-regression clauses
• Options to maximize opportunities for free trade and environmental benefits
– Commitments to exchange information
– Improve respective understanding
– Cooperate towards a particular objective
– Specific sectoral commitments (dedicated chapter or annexes)
16
Greening RTAs on non-tariff measures, technical barriers
to trade and regulatory co-operation - main findings
Source: Bellmann and van der Ven (2020) Greening regional trade agreements on non-tariff measures through technical barriers to trade and regulatory co-operation", https://doi.org/10.1787/dfc41618-en.

17. 17
Effectiveness of environmental provisions:
Empirical Framework
PM2.5 48 countries, 1999-2011
SO2 157 countries, 1970-2008
NOx 157 countries, 1970-2008
RTAs between 1970-2011
RTAs with EPs: 94
RTAs between 1970-2011
RTAs without EPs: 120
RTA with EPs
Population
GDP per capita
Trade openness
Environmental policy stringency
Environmental regulations
Institutional arrangements
Environmental co-operation
Environmental awareness
RTA without EPs
Environmental quality
Data available
Data unavailable
(omitted variable)
Considered channels
Potential reverse causality
(endogeneity)
Source: Martínez-Zarzoso (2018) Assessing effectiveness of environmental provisions in RTAs