Environmental Provisions in Asian Trade Agreements: The case of the China-South Korea Trade Agreement

• Alexandre San Martim Portes
• 14. June 2019

Introduction

Bilateral trade agreements [1] have been a crucial element for the development of international trade regulation in the last two decades. The regulatory complexity of such agreements strengthened the linkage between trade norms and other trade-related fields – such as environment – and contributed for a comprehensive regulatory agenda. Even though western nations have been actively shaping trade norms, new trade agreements involving other strong regional actors might produce different outcomes in the local and global trade regime.

This short article aims to understand how much of the environmental regulation present in the trade agreement between China and South Korea differs from the regulation diffused to the region through trade agreements with western counterparts. For that, using the TREND database [2], the China-Korea trade agreement will be compared to the South Korean agreements with the European Union (EU) and the United States (US) to identify overlaps among them.

Apart from this introduction and the conclusion, this article has three sections. The first section will explain the relevance of environmental provisions in bilateral trade agreements. Next, the second section will explore the presence of environmental regulation in Asian trade agreements. Finally, the third section will present the overlap among trade agreements and discuss the findings.

The Growing Relevance of Environmental Provisions in Bilateral Trade Agreements

The promotion of a regulatory agenda in trade-related issues is not a new phenomenon in the current globalized economy. Multilateral arrangements under the World Trade Organization (WTO) consolidated common global standards in several issues, such as intellectual property rights and investment. Likewise, environmental regulation is a recurrent issue at the multilateral level, either in multilateral environmental agreements (MEAs) or in the WTO agenda for sustainable development and environmental protection (WTO 2018).

Despite the important achievements of the WTO in fostering basic global standards, the complexity of the multilateral negotiations generated deadlocks for the organization’s regulatory agenda (Gantz 2013). In this context, important western economic actors – namely the EU and the US – started promoting bilateral trade agreements as an instrument to not only reinforce economic ties with relevant trade partners, but also to promote their own regulation [3]. Trade agreements outside the WTO scope became, thus, a powerful instrument for trade norm diffusion [4].

Environmental provisions are present in almost all trade agreements. Data from the WTO presented in Figure 1 shows the growing presence of environmental regulation in regional trade agreements, showing that almost all agreements registered in the WTO until 2015 contain environmental provisions. It is noteworthy that most of these agreements tackle environmental issues beyond its exceptions [5] and the preamble.

Figure 1. Evolution of RTAs with provisions explicitly mentioning environment

Environmental Provisions in Asian Bilateral Trade Agreements

Following the global trend, bilateral trade agreements in Asia also reflect the international commitments to environmental issues. The cases of China and South Korea are good examples of this evolution. For instance, China concluded a trade agreement with the Association of Southeast Asian Nations (ASEAN) in 2004. This agreement contains only three environmental provisions and two of them are exceptions. The trade agreement between China and India, singed in 2006, shows an improvement in environmental regulation: it contains 12 environmental provisions, including the ones that go beyond exceptions. Similarly, the agreement between China and Singapore, signed in 2008, contains 13 provisions.

South Korean bilateral trade agreements present a similar trend. The agreement between South Korea and Singapore, signed in 2005, contains 24 environmental provisions. The agreement with India, singed four years later, contains 40 environmental provisions. Thus, the number of environmental provisions in Chinese and South Korean trade agreements follows the global tendency of issue linkage between environment and trade. However, since the first bilateral arrangements, the South Korean trade agreements presented more provisions than the Chinese ones.

Finally, the trade agreement between South Korea and China, singed in 2015, contains a total of 104 environmental provisions. This impressive number of provisions, especially if compared to the previous agreements signed by these countries, raises the question as of the motivations behind this increase. This article analyzes the hypothesis that previous agreements between South Korea and western actors (namely the EU and the US) influenced this trade agreement.

A first reason to argue this hypothesis is the relevance of environmental provisions for these two actors. Based on the TREND Database, the EU and the US have the greatest numbers of environmental provisions in their trade agreements: a total of 3005 provisions for the EU and 1325 for the US. Moreover, both actors promote environmental standards as part of their trade policy (Jinnah and Lindsay 2016; European Commission 2018). To understand the influence of the EU and the US in the China-South Korea trade agreement, it is necessary to analyze the overlap among these trade agreements.

The Overlap among Korean Trade Agreements

The arrangements between Korea and its western counterparts show a robust regulatory content in environmental issues. The trade agreement with the EU, signed in 2010, contains 82 environmental provisions, and the agreements with the US [6] totalize 118 provisions. As shown in Table 1, these agreements regulate mostly environmental protection, the limits of regulation (“regulatory space”), and implementation matters. This pattern is also observable in the trade agreement between Korea and China. However, comparatively, this agreement shows more interest in “development” and “coherence” issues than the previous agreements.

Table 1. Number of environmental provisions in the trade agreements between South Korea and China, the EU, and the US, divided according to the regulatory field.

Source: Morin et al. 2018, own elaboration.

Table 2. Share of overlap among the South Korean trade agreements with China, the US, and the EU (%).

Source: Morin et al. 2018, own elaboration.

Even though the number of provisions tackling each topic already shows some discrepancies among the agreements, the shares of overlap (displayed in Table 2) highlight important insights into the regional trade governance. First, provisions in the China-Korea agreement are more similar to the EU-Korea agreement than the US-Korea one. This higher overlap is observable in most of the topics, with the exception of “coherence” and “development.” Second, the data indicates that the Korean agreement with China follows some global standards, since 44% of the provisions of the China-South Korea trade agreement overlaps with both the EU and US agreements. Nonetheless, 56% of the agreement differs from the standards diffused by western economic actors, pointing to elements prioritized in the Asian trade and environmental regimes.

Two categories present a share of overlap lower than 30%: MEAs and development. When looking closer into the regulatory field MEAs, it can be seen that each trade partner has different priorities, reinforcing provisions from different multilateral agreements. For instance, while the EU presents provisions related to the United Nations Framework Convention on Climate Change (UNFCCC) and the Kyoto Protocol, the US is more interested in the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) and the Whaling Convention, and China requires the implementation of the Convention on Biological Diversity (CBD) and the Nagoya Protocol. Thus, the EU shows more concern to climate change, the US to the preservation of the fauna and flora, and China to the use of genetic resources.

Likewise, the category “development” presents similar differences. While the agreements with the EU and China promote the equitable sharing of benefits arising from use of genetic resources, the arrangements with the US and China foster technical assistance, training or capacity building. However, only the agreement with China has regulations on the consent from the appropriate authority prior to accessing genetic resources and on technology transfer in the field of environment.

Conclusion

The China-Korea agreement is an interesting case of how bilateral trade agreements have been promoting environmental regulation. It shows that environment is a growing concern in the trade relations in the region and follows a global path not only in the number of provisions dedicated to this issue, but also in the topics covered. Nonetheless, the fact that only 44% of the regulation in the China-Korea agreement overlaps the regulation in Korean agreements with western counterparts indicated that the regional environmental regime follows its own priorities. Thus, the Korea-China agreement shows that some topics, such as genetic resources, are more relevant for Asia than to other regions. This analysis points to the capacity of the trade regime to change environmental protection and shape regional regulation according to local interests. Moreover, it shows that norm diffusion from western nations is relevant for the China-Korea FTA. However, the regionally promoted norms are not completely congruent with the “western norms”.

[1] This article uses the term “bilateral trade agreements” for agreements beyond the multilateral trade scope of the WTO, including terms such as Free Trade Agreements (FTAs), Preferential Trade Agreements (PTAs), and Regional Trade Agreements (RTAs).

[2] The Trade and Environment (TREND) Database is provided by Morin et al. (2018). It presents all environmental regulation in trade agreements, allowing an easy comparison among them. A full description of the categories of environmental provisions used in this article can be found at the TREND Analytics website (Berger et al. 2017).

[3] See, for instance, Moerland (2017) for a discussion on the regulation on Intellectual Property Rights in bilateral trade agreements as part of a “package deal.”

[4] Norm diffusion is “the movement and adoption of norms across political borders.” (Jinnah & Lindsay 2016: 45)

[5] “The exceptions clause specifies that prohibitions or restrictions on imports, exports or goods in transit justified on grounds of the protection of health and life of animals or plants are not precluded as long as such prohibitions or restrictions do not constitute a means of arbitrary discrimination or a disguised restriction on trade.” (Monteiro 2016: 6)

[6] The number of environmental provisions between Korea and the US is based on two agreements. In the trade agreement between the two countries, signed in 2007, there are 87 environmental provisions, which were complemented by 31 provisions of the Agreement on Environmental Protection (AEP), signed in 2012.

[7] Including the US-Korea AEP

References

Berger, A.; Brandi, C.; Bruhn, D.; Morin, J. (2017): TREND analytics – Environmental Provisions in Preferential Trade Agreements. German Development Institute / Deutsches Institut für Entwicklungspolitik (DIE), Bonn, Germany, and Université Laval, Canada. DOI: 10.23661/trendanalytics_2017_1.0

European Commission (2018): Sustainable Development. Available at: http://ec.europa.eu/trade/policy/policy-making/sustainable-development/ (31 December 2018).

Gantz, D. (2013): Liberalizing International Trade after Doha: Multilateral, Plurilateral, Regional, and Unilateral Initiatives, Cambridge University Press: Cambridge.

Jinnah, S. & Lindsay, A. (2016): Diffusion Through Issue Linkage: Environmental Norms in US Trade Agreements, Global Environmental Politics, vol 16 (3), pp. 41-61. DOI: 10.1162/GLEP_a_00365.

Moerland, A. (2017): Do Developing Countries Have a Say? Bilateral and Regional Intellectual Property Negotiations with the EU. International Review of Intellectual Property and Competition Law, vol 48 (7), pp. 760-783. DOI: 10.1007/s40319-017-0634-6.

Monteiro, J. (2016): Typology of environment-related provisions in regional trade agreements, WTO Staff Working Paper, No. ERSD-2016-13, World Trade Organization (WTO), Geneva. Available at: http://hdl.handle.net/10419/145110 (31 December 2018).

Morin, J.; Dür, A.; Lechner, L. (2018): Mapping the trade and environment nexus: Insights from a new dataset, Global Environmental Politics, vol. 18(1). DOI: https://doi.org/10.1162/GLEP_a_00447.

World Trade Organization (2018): Trade and Environment. Available at: https://www.wto.org/english/tratop_e/envir_e/envir_e.htm (31 December 2018).