WTO to trample on UNFCCC’s climate change agenda?

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Geneva, 3 Oct (D. Ravi Kanth) — At a meeting with CEOs and other representatives from leading agricultural companies as well as related organizations on 1 October, the World Trade Organization’s Director-General, Ms Ngozi Okonjo-Iweala, suggested that environment-related measures “present significant challenges for market actors, especially in developing countries where businesses may need to comply with divergent standards to access international markets.”

The DG noted that around 8,661 environment-related notifications have been submitted to various WTO committees since 1997, while acknowledging the importance of robust environmental standards, traceability, and certification systems in the interconnected global market, according to a news release posted on the WTO’s website.

She underscored the critical need to address the regulatory fragmentation.

Ms Okonjo-Iweala emphasized the need for stronger dialogue between policy makers and businesses to ensure that new sustainability regulations “do not end up harming small farmers”.

The DG, however, appears to have remained silent on the unilateral trade-related environmental measures like the carbon border adjustment mechanism (CBAM) or trade-related deforestation measures being considered by the European Union, said people familiar with the development.

At a time when the global supply chains are being severely fragmented due to worsening geopolitical and geoeconomic tensions, placing the multilateral trading system in peril, apparent attempts to expand the trade and environment agenda at the WTO may not yield any meaningful results, said people familiar with the development.

The DG’s repeated attempts to include the issue of trade in the Nationally Determined Contributions (NDCs) of Parties to the Paris Climate Change Agreement through the “investment facilitation pathway” since the 27th Conference of the Parties to the United Nations Framework Convention on Climate Change (UNFCCC) meeting in Sharm El-Sheikh, Egypt in November 2022, failed to garner much support.

Ms Okonjo-Iweala, however, justified the inclusion of trade in the NDCs as “part of [the] solution for achieving a low-carbon, resilient, and just transition.”

The DG along with the EU and several other industrialized countries, including the United States, worked hard to bring trade-related climate measures into the WTO’s 13th ministerial conference (MC13) outcome document in Abu Dhabi in February this year.

However, there was no agreement to include this item on the agenda.

Paragraph 15 of the MC13 outcome document (WT/MIN(24)/DEC) merely states: “In recalling the objectives in the Marrakesh Agreement and in recognizing the role that the multilateral trading system can play in contributing towards the achievement of the UN 2030 Agenda and Sustainable Development Goals, in so far as they relate to the WTO mandate, we underscore the importance of trade and sustainable development in its three pillars – economic, social, and environmental.”

It is against this backdrop that an expansive agenda of the WTO Committee on Trade and Environment (CTE) meeting beginning on 7 October raises doubts as to whether the WTO should pursue climate change issues when they are specifically mandated to be addressed/resolved at the 29th Conference of the Parties to the UNFCCC, which is scheduled to be held in Baku, Azerbaijan, this November.

TRADE & ENVIRONMENT WEEK

Under the theme of “Trade for Clean Energy Transition for All”, the WTO is convening a high-profile Trade and Environment Week 2024 from 7 to 11 October complementing the regular work of the CTE.

The aim of this event, according to a WTO press release, is to foster discussions around trade-related environmental issues between the WTO and trade and environmental stakeholders.

Among the events that are being planned are:

(1) “Empowering trade to combat plastic pollution”;

(2) “Building resilient and responsible critical minerals supply chains for the clean energy transition”;

(3) “Trade and environmental sustainability: drawing on experiences in sustainable agriculture”;

(4) “Improving circularity for EV batteries and critical minerals through trade”;

(5) “The contribution of agricultural sector to addressing environmental challenges”; and

(6) “Strengthening the role of voluntary sustainability standards (VSSs) in trade policy”.

While these seemingly publicity-driven events may yield little or nothing, critical issues raised by members through their submissions are expected to be discussed at the regular CTE meeting next week.

According to a restricted room document (RD/CTE/250), seen by the SUNS, five important submissions made in 2024 are likely to come up for discussion during the meeting.

China’s submission made on 7 June 2024 on “advancing multilateral discussions on trade-related climate measures (TrCMs)” will be the first topic for discussion at the CTE meeting.

Despite little support for TrCMs in the run-up to MC13 in Abu Dhabi, it is somewhat unclear why China is tabling this item at a time when its green goods, including solar panels, electric vehicles and other items are being subjected to trade restrictions and high tariffs.

China wants the WTO Secretariat to prepare “a compilation of Members’ submissions to help identify common interests and concerns regarding TrCMs and a note on recent developments in the environment-related provisions in recent RTAs.”

The Chinese submission has proposed “hybrid approaches to discussions, combining current CTE talks with solution-oriented technical and scenario-based meetings, focusing on transparency and understanding of TrCMs, consistency and interoperability, reducing potential trade frictions, and promoting the diffusion of climate- friendly technologies.”

China highlighted its “recent proposal to the TBT Committee to explore decarbonization under the TBT Agreement, with a view to encourage Members to share their domestic good regulatory practices on decarbonization.”

US SUBMISSION ON TrCMs

Coincidentally, the United States, which has imposed a spate of seemingly unilateral trade measures on Chinese green goods, also circulated a submission, titled, “Understanding the opportunities and challenges of the green transition: coherence and interoperability of Trade-related Climate Measures”, on 4 April 2024.

The US submission said that “the time is ripe to pull some aspects of the great deal of work on TrCMs into a deeper discussion that is data- and fact-driven and could help inform WTO Members considering practical policy options and tools to address climate change while recognizing potential trade-related impacts.”

It highlights “how useful it would be to have conversations, and experiences of individual Members in understanding the practical effects of different TrCMs, both in terms of their effectiveness in mitigating GHG emissions and their effects on existing trade patterns.”

The US, while lending support to the controversial proposal of the EU and several other industrialized countries on the continuation of the informal discussions on TrCMs under the TESSD (Trade and Environmental Sustainability Structured Discussions), said “it is important to identify specific topics that are ripe for bringing back into the regular work of the relevant WTO committees, such as the CTE.”

The US said its submission “proposes ways to deepen the conversations related to climate and trade, particularly on fostering greater coherence and interoperability across various TrCMs.”

According to the US, the “discussion could potentially be considered at two levels: (i) policy design and implementation; and (ii) data and methodology.”

“Members may pursue these discussions through: (i) WTO Member Retreat(s); (ii) Thematic discussions in WTO committees and cross-committee work; (iii) multi-stakeholder events; and (iv) a compilation report, driven by participating WTO Members and with the support of the WTO Secretariat.”

POLICY SPACE

The African Group made a submission on 14 May 2024 on “Policy space for industrial development – Advancing WTO Committee work to support structural transformation and industrial development in developing countries.”

The submission highlighted “that commodity dependence leaves developing countries vulnerable to international shocks and uncertainties.”

The African Group emphasized that “structural transformation and inclusive development were imperative”, arguing that it needs to “draw on industrial policy measures and tools to help developing countries close the existing industrial development gap.”

It also calls for the WTO “to build on the momentum generated at MC13 on the need to re-calibrate specific WTO rules to make them fit for purpose,” suggesting that “the African Group will pursue discussions in the CTD as a focal point, as well as other relevant WTO bodies.”

A day before MC13 ended in Abu Dhabi on 2 March 2024, a large group of developing countries proposed a ministerial declaration.

Argentina, Bangladesh, Barbados, Bolivia, Brazil, Cabo Verde, Colombia, Ecuador, Egypt, Honduras, Indonesia, Kazakhstan, Panama, Paraguay, Peru, South Africa, Uruguay, Venezuela, and the African Group acknowledged “the role of the multilateral trading system in the Sustainable Development Goals and in promoting export-led growth in developing countries.”

The signatories called on Members “to refrain from imposing unilateral trade-related environmental measures that create unnecessary obstacles or arbitrary or unjustifiable discrimination between countries, while encouraging enhanced transparency of the applied measures.”

The developing countries underscored the need to “strengthen discussions in CTE and other relevant bodies of the WTO on how the multilateral trading system can best contribute within its mandate to global responses to the environmental crisis, taking into account the principles and provisions of relevant international environmental treaties and norms of international environmental law.”

They agreed “to work together to foster a dialogue on how to promote trade that supports sustainable development and just transitions and to promote a coherent, open, Member-driven, consensus-based, and inclusive approach in the discussion of trade and environment issues that arise across WTO bodies.”

They said that “reinvigoration of the discussions on trade and technology transfer, including of environmentally sound technology across multiple WTO bodies as well as work to promote, within the WTO mandate, cooperation on trade, innovation, and climate finance are also part of the co-sponsors points.”

In short, the agenda with several other items for the CTE meeting next week poses a big challenge at a time when “the guardrails of the WTO appear to be breaking”, said people familiar with the discussions. – Third World Network