Members of the WTO’s Committee on Trade and Environment (CTE) last week discussed a proposal on border measures, one of the more difficult issues lying at the trade and climate change nexus. The submission, tabled by Singapore, stresses that the multilateral trading system and environmental protection are both important and that they should be mutually supportive in order to promote sustainable development.
The submission, titled “Promoting Mutual Supportiveness between Trade and Climate Change Mitigation Actions: Carbon-related Border Tax Adjustments,” argues that trade liberalisation is crucial for environmental protection.
“One concrete way in which Trade Policy and the WTO can and should play a role in supporting environmental protection is through the liberalisation of Environmental Goods and Services (EGS),” the submission reads. “Aside from environmental benefits, EGS liberalisation will also have trade-led development benefits.”
The Singapore document refers to a list of 35 environmental goods that it has submitted to the CTE Special Session (JOB/TE/5) and says that trade policy - particularly the liberalisation of climate friendly goods, services and technologies - will complement UNFCCC efforts to combat climate change.
The WTO-UNFCCC nexus
Article 3.5 of the UN Framework Convention on Climate Change requires members to ensure that the domestic actions they take to combat climate change are non-discriminatory and that they are not used as disguised trade barriers.
The WTO contains similar requirements. Because members may adopt domestic carbon price mechanisms (e.g. cap-and-trade, carbon tax) to mitigate climate change, some consider implementing border measures - or border tax adjustments (BTAs) - to address competitiveness and leakage issues that may result.
The WTO permits the use of border measures subject to certain conditions. It is, however, unclear whether all measures on imports would be in line with WTO rules. And even if such measures are permitted, they could potentially be abused. In addition, BTAs could conflict with the UNFCCC recognition of the need for flexibility in policy responses to take account of different conditions prevailing in different countries - the principle of common but differentiated responsibilities (CBDR). Not all countries have the capacity to develop alternative energy sources and it is cumbersome to identify the energy or carbon content embodied in traded products.
According to Singapore’s submission, if there is to be text on trade in a future global agreement on climate change, members should ensure that it is consistent with their rights and obligations in both the UNFCCC and the WTO.
Singapore is requesting that the WTO Secretariat prepare a compilation of existing studies on the role that BTAs can play in addressing competitiveness and leakage concerns, such measures can be applied in a WTO-consistent manner. It is also looking to develop a set of multilaterally agreed guidelines to pre-empt the abuse of BTAs.
Other members did not support this request as they consider the 2009 study on trade and climate change by the WTO and UNEP to be sufficient, according to those close to the talks. The same members reportedly say there is no room for BTAs to be allowed under WTO rules. Members in general favoured further discussion of the measures though in the CTE and thus the submission reached its objective of raising awareness of the issue.
UNFCCC briefs members on progress
Other climate issues took the stage at the CTE meeting when a representative of the UNFCCC secretariat briefed members on the progress in the negotiations on climate change. A few emerging economy members again suggested that the CTE is not to be the right place to discuss climate change, as they would prefer to have the freedom to first reach an agreement on climate change under the UNFCCC and discuss the implications for trade afterwards. Most other members reportedly responded positively to the presentation, remarking that it is very useful to be aware of what happens in the climate change negotiations.
There was particular interest in a “forum on response measures” under the UNFCCC, which will look into ways to address the negative consequences on developing countries of efforts to mitigate greenhouse gas (GHG) emissions. For example, border taxes, free allowances in emissions trading schemes, and access to climate-friendly goods and technology could have effects on international trade.
While there is currently no ongoing forum to discuss and address these trade-related climate issues, UNFCCC members last December in Cancun, Mexico agreed to devote time and space to these response measures during the Bonn and Durban climate talks this year.
Rio+20 ambassador briefs on green economy
Sha Zukang, the UN Nations Under-Secretary-General for Economic and Social Affairs and Secretary-General of the Rio+20 conference, also briefed the committee on preparations for Rio+20 and the importance of open trade for the green economy. Sha highlighted the benefits of trade liberalisation in EGS and took several questions from delegates. Queries ranged from basic definitions related to the green economy to the role of technology transfer in the process and the linkages to sustainable governance.
In general, Sha recommended to avoid green protectionism, while strengthening the benefits of trade and an open economy for sustainable development.
Finally, the Chair of the CTE decided to hold further consultations with Members on the need for the secretariat to carry out a sectoral review on energy and forestry, and eco-labelling initiatives were shortly discussed.
