Border Tax Adjustments

Countries may seek to internalize their environmental costs by applying charges to domestic production and products. These producers, however, may claim that they are at a price disadvantage with imports unless a border tax adjustment is applied. While this appears straightforward in theory, it is often far less so in practice. The exporting country may claim it has internalized environmental costs and the border tax is simply a protectionist move. It believes it is its sovereign right to determine the level of environmental protection required. Indeed, different countries have different environmental needs and systems which are appropriate to their own circumstances.

The debate on this topic was vigorous; but no clear consensus emerged. Canada recognized that there was justification for ecotaxes on important environmental impacts of products at the consumption or disposal stage but not on impacts at the production stage (PPMs). Canada felt this was "extraterritorial imposition of domestic standards" that had been "clearly rejected by GATT."^[3] Canada was clearly fearful of the American use of PPM ecotaxes on imports from north of the border. On this and other topics, the Committee's deliberations achieved no consensus; but a series of case studies would be undertaken to clarify the issues.