Executive Summary

　　The Working Group on Trade and Environment is the newest of the Council's working groups, It was created in 1995 and has only formally met twice. The last meeting was held in Wuyishan, Fujian Province in May 1996.

　　Recognizing the importance of trade and the environment to a country whose exports are growing as rapidly as those of China, and recognizing that China will soon rejoin the WTO, the Working Group has initiated four projects:

　　1)An examination of the potential sources of `green' forms of environmental protection, in particular the effects of eco-labelling, voluntary environmental standards and consumer boycotts;

　　2)Accelerating 'green' food development in China .

　　3)Possibilities for joint implementation; and

　　4)Examining the relationship between pollution havens and ozone-depleting substances(ODS).

　　The first two of these projects have now been completed and the Working Group is pleased to submit its recommendations to the Council for its consideration.

　　1. Eco-labelling

　　A. Strengthen China's eco-labelling program

　　It is important to increase public awareness of the eco-labelling program and to ensure participation of interested parties, China has made efforts to disseminate information on environmental labelling by means of television, broadcasting, and newspaper reporting, as well as press conferencing. However. the environmental label is still not widely known, As a result, the contribution of eco-labels to the sales of some eco-labelled products is not significant, In the process of eco-label ling assessment and certification, more representatives from various relevant organizations (such as manufacturers, retailers, consumers, government officials, and academic researchers)should be invited to contribute, Foreign importers should also be given opportunities to participate in the process.

　　Efforts should be made to increase the number of environmentally friendly products,and to increase their market visibility.

　　B. Develop Criteria for Mutual Recognition

　　China should actively participate in international discussions on eco-labelling and promote the idea of the mutual recognition by countries by eco-labels, Eco-labelling criteria and specifications will differ between developed countries and developing countries, In order to avoid the creation of trade barriers, efforts should be made to explore the establishment of recognition through international negotiation and cooperation. This will require the strengthening of China's bilateral as well as multilateral cooperation with other eco-labelling programs.

　　In implementing an eco-labelling program, China should take into consideration internationally accepted principles, such as ISO eco-labelling standards. Consideration should also be given to following the WTO Technical Barriers to Trade(TBT) rules in order to avoid subsequent trade difficulties.

　　The development of the ISO eco-labelling standards is not as far advanced as the first two ISO 14000 standards. It is important for China to actively participate in and provide input to the standards-setting process. Meanwhile, China should also participate in other international cooperation activities.

　　C.Explore opportunities for China's export of eco-labelled products

　　As the development of ISO 14000 environmental standards is moving forward rapidly, eco-labelling is likely to be linked to the ISO environmental management system. Chinese enterprises, in particular those export-oriented enterprises, should be made well aware of this situation, be encouraged to prepare for the implementation of environmental management system standards, and be helped to obtain ISO 14000 certification as soon as possible, Steps should be taken to ensure that information about these developments is made available to enterprises in China.

　　At the same time, China should also actively disseminate information about its program to the potential importers of Chinese goods.

　　2. China's Green Food Development

　　A. China should further promote the development of eco-agriculture and green food, Eco-agriculture, which is in reality a combination of China's traditional agriculture with modern farming. It represents the only way for sustained growth.

　　B. China's green food labelling is divided into two categories; the Double A Grad e and the Single A Grade, China should develop its green food in two phases in order to gradually link its green food to international market standards:

　　StepⅠ:Strictly regulate the standards of Single A Grade green food produces by t he year 2000,with every item scientifically and quantitatively specified at a higher standard than general food produces, Based on this ,vigorously develop the Single A Grade for green food in conjunction with the transformation of the country's agricultural structure to halt the deterioration of the environment .In many regions of China ,particularly the mountainous and remote areas, chemical fertilizers and other agricultural chemicals are basically not used at all in farming. Therefore, many organic food products, although they are not regarded as organic food, are already available in these regions, Therefore, it is possible to develop not only Single A Grade green food, but also Double A Grade food during this phase.

　　StepⅡ: By the year 2010,the development of Single A Grade green food will become mature ,along with the completion of the agricultural structural readjustment and the spread of ecological agriculture in China, By then, the Double A Grade green food should also be developed and marketed worldwide.

　　Ｃ. The Ministry of Agriculture needs to ensure that the development of ecological agriculture becomes part of the structural transformation of Chinese agriculture, NEPA may, based on the national overall planning for environment protection, regulate standards, carry out quality control and examination, and deliver licenses, The cooperation between the Ministry and NEPA in coordinating their respective duties, including mutual supervision, will contribute greatly to the healthy development of China's green food sector.

　　While two of the Working Groups projects have not yet been completed and finalized, the Working Group is pleased to present some preliminary considerations to the Council:

　　３.Project proposals for Activities Implemented Jointly(AIJ)

　　As mentioned above, this research is still in its infancy. Because of the complexity of the issue, we expect that AIJ will remain in the work program of the Working Group for at least the next three years. Immediate further research will concentrate on the following areas:

　　Ａ.Research on the development of a scheme to promote AIJ projects in China ,This will involve an examination of the role of the Framework convention and other international mechanisms;

　　Ｂ. The organization of a series of workshops in China on the possibilities of AIJ for China; and

　　Ｃ. The identification of possible AIJ projects in China and the partnerships an d mechanism needed to implement them.

　　４. Preliminary Consideration for the Control of Ozone Depleting Substances in Foreign Direct Investments(FDI)

　　Ａ.Efforts should be made to make Chinese enterprises and people in charge of approving FDI aware of the importance of the protection of the ozone layer, and inform them of the contents of the Montreal Protocol and China's regulations and policies.

　　Ｂ. The Ministry of Foreign Trade and Economic Cooperation (MOFTEC) should fully participate in the international negotiation and domestic policy making in this field, An effective coordination mechanism should be set up between NEPA and MOFTEC in this regard.

　　Ｃ. The Chinese Program(CP) needs to be further amended and considerations should be given to the role of FDI and its complexity, Extra funding should be provided from the international community to assist Foreign Funded Enterprises(FFEs)to phase-out of the production and consumption of ODS.

　　Ｄ. FDI in ODS production and consumption should be strictly forbidden, and FDI, in using interim substances such as HCFC-22, should be strictly limited. A detailed product category list should be published so that the examination and approval authorities for FDI and domestic enterprises can know the overall national policies in this field in order to implement them.

　　Ｅ.The transfer of ODS production and consumption from the coastal region to inland China should also be prohibited .A nation-wide survey of FDI in this regard should be conducted to know the actual situation and adopt suitable policies and measures.

　　Ｆ. Transnational Companies (TNCs) in China, especially those with branches in different parts of China, should initially be asked to take actions to phase-out ODS production and consumption. Their parent companies should provide them with advanced technology and financial support.

　　Future Program of the Working Group

　　The projects on eco-labelling and green food in China have been completed. The one exception to this is the work which the group is doing on ISO 14000.Although l not strictly an eco-label, the ISO process is seeking to develop international standards for environmental management and auditing at the level of the firm.

　　The International Organization for Standardization (ISO) is an international nongovernmental organization which brings together national standard setting organizations. It has been given special status under the new WTO agreement on TBT. Big inning with the Earth Summit in 1992,ISO has been working to develop agreed standards for environmental management, environmental auditing, eco-labelling, life-cycle management and environmental performance standards. The first two are likely to be adopted this year, with the remainder following later.

　　Recognizing that ISO 14000 has great potential for China's environmental management and for its trade, the Working Group has agreed to sponsor a major national seminar on China and ISO14000, to be held in Beijing in November 1996.

　　The Working Group will be sponsoring the participation of a number of foreign experts and preparing three papers for the symposium.

　　The project on the production and use of ozone depleting substances will continue, but is not expected to be finished in 1997.THe project on AIJ is expected to continue for the next several years.

　　The Working Group has decided to schedule its meetings so that the meeting in early summer will produce recommendations for the Council .Its second meeting of t he year will concentrate on the continuing work program.

　　The second meeting of the Working Group will be held in Beijing, immediately before the 1996 meeting of the full Council. This meeting will develop and approve the coming year's work program, which will be reported verbally to the Council.