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India unites South over North’s unilateral environ measures

Environment 2023-03-17, 9:04pm

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Geneva, 16 Mar (D. Ravi Kanth) — India’s proposal for addressing growing environmental measures as protectionist non-tariff measures has apparently galvanized developing and least-developed countries across Africa, South America, and the Caribbean in a seemingly unprecedented development at the World Trade Organization on 14 March, said people familiar with the development.

In sharp contrast to massive support for the Indian proposal, the European Union appears to have suffered a backlash against its controversial carbon border adjustment mechanism (CBAM) and deforestation measures, said people familiar with the development.

During the first day’s proceedings at the WTO’s Committee on Trade and Environment (CTE) on 14 March, members apparently tore into the EU’s unilateral measures such as the CBAM as well as on deforestation during a discussion on the key features of the European Commission’s proposal for a regulation on packaging waste.

The EU, however, sought to justify its proposed measures related to both the CBAM and deforestation on grounds that they are compatible with the core WTO provisions, said participants, who asked not to be quoted.

The EU’s trans-Atlantic partner – the United States – apparently remained silent on the EU’s proposal at the meeting on 14 March, while the United Kingdom seemed to have lent half-hearted support to the CBAM, said people, who asked not to be identified.

Significantly, even some industrialized countries like Japan and Korea among others appear to have cautiously raised concerns about some aspects of the EU’s CBAM at the meeting.

Several South American countries – Brazil, Uruguay, Paraguay, Colombia, and Nicaragua – as well as India, Kenya, China, and Russia – attacked the EU’s controversial measures on both the CBAM and deforestation, said people, who asked not to be quoted.

After the discussion on two other controversial proposals – fuel subsidies, and the dialogue on plastics pollution and environmentally sustainable plastics trade – members focussed on India’s comprehensive proposal against attempts to discuss allegedly controversial unilateral and protectionist measures, said people, who asked not to be quoted.

INDIA’S PROPOSAL

India presented the salient features of its proposal against the increasing use of unilateral measures under the garb of environmental measures to address climate change at the World Trade Organization, including the EU’s controversial carbon-border-adjustment measures, said people familiar with the development.

The unilateral measures such as the EU’s carbon border adjustment mechanism (CBAM) apparently violate the WTO’s core rules and covered agreements, India has argued.

More disturbingly, India said such measures pose “systemic implications for international law as a whole – since any unilateral action undermines multilaterally negotiated rights and obligations of countries.”

In a restricted Job document (Job/TE/78), titled “Concerns on Emerging Trends of Using Environmental Measures as Protectionist Non-Tariff Measures” and circulated on 10 February, India has covered the entire gamut of unilateral measures and offered a blueprint for the WTO to pursue against climate change.

In the document, India said somewhat emphatically that “the WTO cannot and should not undermine or render ineffective, the specialized rules of multilateral environmental agreements.”

According to India, “the WTO should remain an international organization, which promotes effective collective action rather than unilateral measures.”

Even the WTO’s Director-General, Ms Ngozi Okonjo-Iweala, tried hard to include the issue of trade in the Nationally Determined Contributions (NDCs) of the parties to the Paris Climate Change Agreement through a “trade and investment facilitation pathway” at the 27th Conference of Parties (COP27) of the United Nations Framework Convention on Climate Change (UNFCCC) in Sharm El-Sheikh, Egypt.

She sought to justify the inclusion of trade in the NDCs as “part of the solution for achieving a low-carbon, resilient, and just transition.”

However, due to intense opposition from several developing countries, Ms Okonjo-Iweala failed to include her proposal in the COP27 outcome document.

IMPORTANCE OF ADDRESSING GHGs

In its proposal, India argued that “reducing greenhouse gas emissions to address climate change is a global effort”, as per the Paris Climate Change accord of 2015.

It pointed out that “most WTO members are represented at the United Nations Framework Convention on Climate Change (UNFCCC) and participate in its negotiated outcomes.”

It said the foundational principles of the Paris Agreement are based on “the principles of equity and common but differentiated responsibilities and respective capabilities (CBDR-RC), in the light of different national circumstances, and nationally determined contributions (NDCs) made by the parties to the UNFCCC.”

More importantly, the foundational principles recognize that “the largest share of historical and current global emissions of greenhouse gases originated in developed countries, that per capita emissions in developing countries are still relatively low and that the share of global emissions originating in developing countries will grow to meet their social and development needs,” said India.

According to India, “it is also important to underscore that the principles of “respective capabilities” recognize the different socioeconomic status of countries”, as stated in the preamble to the Marrakesh Agreement establishing the WTO.

The preamble to the Marrakesh Agreement “recognizes this concept (respective capabilities) when it notes that the expansion of trade in goods and services in accordance with the objective of sustainable development would require protection and preservation of the environment and the means of doing so, in a manner consistent with the respective needs and concerns of countries at different levels of economic development.”

It said the Paris Agreement provides for different NDCs to “effectively reflect different climate policy choices across countries”, which may be based on different national circumstances.

“The policy choices include a variety of instruments like regulatory measures for conservation, afforestation, emission reductions, transition to non-fossil fuel-based energy sources, standards, taxation, carbon pricing, and carbon trading,” India argued, suggesting that the “Regulatory heterogeneity is inherent in the concept of NDCs under the Paris Agreement of the UNFCCC.”

India said that “carbon border [adjustment] measures (CBAMs) that are being considered (by the European Union and the United States) for imposition on imported products, effectively amount to prioritizing a singular policy of the importing country over those of exporting countries and will amount to imposing a unilateral vision of how to combat climate change.”

Such unilateral policies go against “a country which may be fully compliant with its NDCs under the UNFCCC, has to either match the importing country’s emission reduction obligations or pay a cost/price for (the) trade,” India said.

Despite the recent US-EU deal on steel, where carbon pricing was suggested, India said that much of the carbon border measures seem to be targeted and applied to “trade-exposed industries” such as steel, aluminum, plastics, polymers, chemicals, and fertilizers.

It seems to reflect “the underlying competitiveness concerns driving such measures.”

It places an obligation on importers and exporters to comply with mechanisms of verification of whether or not deforestation occurred in the country of origin, enhancing compliance burdens, said India.

India also hit out at the controversial evolving laws pertaining to deforestation, suggesting that they reflect the growing trends towards rule-making that has an extra-territorial reach.

It said such measures will only burden trade partners, especially the developing countries, with “impractical, cumbersome and costly compliance obligations.”

MRL MEASURES

Another concern, according to India, “is with regard to measures that prescribe Maximum Residue Limits (MRL) for certain products, on the reasoning that this is for an environmental objective.”

While acknowledging that “environmental objectives are legitimate policy choices for each government to consider,” India said that “to the extent that such measures are being imposed without contextual risk assessment and without factoring in the differences in climatic and soil conditions around the world, they would need careful deliberation to ensure reasonable nexus with the objective sought to be achieved.”

India said that “another area of concern is the emerging arrangements of “green Tariff Rate Quotas”, expressing “concern on these arrangements that seek to develop a methodology to assess the carbon content of traded commodities and provide specific tariff-free quotas to select Members.”

WTO’S CTE MUST CONSIDER KEY ISSUES

In the context of climate change, India said the key issues that the WTO’s Committee on Trade and Environment can address are those which emanate from the WTO agreements.

They include:

1. Facilitate and promote development and transfer of environmentally sound technology (EST), including financial commitments to ensure access to such technology, and investments in environmental projects;

2. Creation of a Trade and Environment Fund with objectives such as facilitating the transfer of ESTs at reasonable prices by funding the incremental costs of sourcing both proprietary and non-proprietary EST through licensing and other mechanisms;

3. Special and Differential Treatment for developing and least-developed country Members including through technical and financial assistance programs.

Also, other relevant bodies such as the TBT (Technical Barriers to Trade) and SPS (Sanitary and Phytosanitary Measures) Committees also have a key role to play in addressing concerns related to measures on MRLs (Maximum Residue Limits).

The more fundamental issue, said India, is that these measures are effectively nullifying the tightly negotiated balance of rights and obligations under the MEAs (Multilateral Environment Agreements), or the principle of special and differential treatment to developing countries under the WTO agreement have not been addressed.

India said that the  Outcome Document of the recent WTO’s 12th Ministerial Conference (WT/MIN(22)/24) has “recognized global environmental challenges including climate change, and the importance of the contribution of the multilateral trading system to promote the UN 2030 Agenda and its Sustainable Development Goals in each of its dimensions, i.e., economic, social, and environmental, “in so far as they relate to WTO mandates and in a manner consistent with the respective needs and concerns of Members at different levels of economic development”.”

In conclusion, India argued somewhat emphatically that “the WTO cannot and should not undermine or render ineffective, the specialized rules of multilateral environmental agreements.”

Also, “the WTO should remain an international organization, which promotes effective collective action rather than unilateral measures.”

Therefore, the issues of environment and climate change are best handled under specialized MEAs (multilateral environment agreements), which work on the principle of collective global action to resolve a global problem, India argued.

Lastly, India urged “WTO Members to ensure that any environment and climate-related trade measures take into account common but differentiated responsibilities and respective capabilities of all Members,” arguing that “any proposed environment and climate-related trade measures should respect the social and economic development needs of WTO Members.”

It said these environmental proposals “should not constitute arbitrary or disguised restrictions or unjustifiable discrimination in international trade.”

MEMBERS SUPPORT INDIA’S PROPOSAL

At the CTE meeting on the first day on 14 March, after India presented its proposal, several countries such as China, Russia, Paraguay, Uruguay, Colombia, Nicaragua, Kenya (on behalf of the African, Caribbean, and Pacific group) and Congo, on behalf of the African Group, and several other countries strongly supported the Indian proposal.

The EU, however, severely opposed the Indian proposal, while the United States was to speak on the Indian proposal on 15 March.

Countries like Korea, Japan, and a few other South East Asian countries apparently adopted a cautious approach on the Indian proposal, said people, who asked not to be quoted.

PROCEEDINGS ON 15 MARCH

On the second day of the CTE’s proceedings on 15 March, the United States apparently said that the principle of common but differentiated responsibilities (CBDR) set out in the Paris Climate Change Agreement should not be brought into the World Trade Organization for addressing trade and environment.

In response to India’s comprehensive proposal against environmental measures being used as protectionist non- tariff measures, the US seems to have argued, on the issue of transfer of technology as raised by India, that Washington does not believe in forced transfer of technology to fight climate change, suggesting that it is a commercial decision that companies would have to make, said a participant familiar with the proceedings.

In addition to the growing trend of imposing environmental measures as protectionist non-tariff measures such as the EU’s controversial carbon border adjustment mechanism (CBAM) and the EU-US agreement on steel which suggests a likely regime of carbon tariffs, the Indian proposal included several key issues such as CBDR and transfer of technology.

India’s proposal coupled with the proposal by Colombia, appear to have galvanized a large majority of developing countries such as the African Group led by Congo, the African, Caribbean and Pacific (ACP) group led by Kenya, Jamaica, Venezuela, Peru, South Africa, and China at the meeting, said several people familiar with the discussions. (See SUNS #9743 dated 16 March 2023 for details of Colombia’s proposal).

Both India and Colombia said that any talks on trade and environment at the multilateral level must be anchored on CBDR.

For example, India highlighted in its proposal, “to ensure that any environment and climate-related trade measures take into account common but differentiated responsibilities and respective capabilities of all Members.”

India emphasized that “any proposed environment and climate-related trade measure should respect the social and economic development needs of WTO Members,” adding that “these proposals should not constitute arbitrary or disguised restrictions or unjustifiable discrimination in international trade.”

In a similar vein, Colombia highlighted, “The principle of Common but Differentiated Responsibilities and Respective Capacities (CBDR-RC) to ensure justice and equity in the implementation of trade policies.”

On transfer of technology, India said “the key issues in the context of climate change that the CTE can address are those which emanate from the WTO agreements, such as:

(a) Facilitate and promote the development and transfer of environmentally sound technology (EST), including financial commitments to ensure access to such technology, and investments in environmental projects;

(b) Creation of a Trade and Environment Fund with objectives such as facilitating transfer of ESTs at reasonable prices by funding the incremental costs of sourcing both proprietary and non-proprietary EST through licensing and other mechanisms;

(c) Special and Differential Treatment for developing and least-developed country Members including through technical and financial assistance programs.”

In response to the Indian demand for the transfer of technology, the US, which is expected to spend $369 billion worth of tax credits, tax exemptions, and subsidies for developing green technologies under its Inflation Reduction Act of 2022, provided a seemingly ambiguous reply, said people, who asked not to be quoted.

On the one hand, the US suggested that it does not believe in forced transfer of technology on grounds that it is companies who develop the new green technologies, said participants who took part in the meeting.

Interestingly, the US does not mention the hundreds of billions of dollars in subsidies that it is providing for developing new green technologies, which, in reality, seems like a gigantic government effort and involvement, said participants, who asked not to be quoted.

Like the billions of dollars of subsidies that were provided to Big Pharma for developing the COVID-19 vaccines, in which pharmaceutical companies made tens of billions of dollars in profits during the pandemic, the US seems to be adopting a similar stand on the new technologies, said participants, who preferred anonymity.

At the CTE meeting, there was overwhelming support for the Colombian proposal, though the proposal could not be discussed in detail.

Even on the Chinese proposal, due to technical constraints, the discussion could not be completed, said participants. (See SUNS #9743 dated 16 March 2023 for details of China’s proposal).

The Chinese proposal, however, received support from Norway, the Philippines, Singapore, Brazil, and India among others at the meeting.

These countries are understood to have said that China’s proposal is constructive and helpful to the discussions on trade and environment.

India apparently said that in its view, China’s proposal is in line with paragraph 14 of the Outcome Document of the WTO’s 12th ministerial conference (MC12).

Paragraph 14 of the MC12 Outcome Document notes “the importance of the contribution of the multilateral trading system to promote the UN 2030 Agenda and its Sustainable Development Goals in its economic, social, and environmental dimensions”, and “the role of the Committee on Trade and Environment as a standing forum dedicated to dialogue among Members on the relationship between trade measures and environmental measures”.

China said that “WTO members looked forward to further strengthening the role of the Committee on Trade and Environment (CTE).”

At the meeting, the EU’s proposal on “reinforcing the deliberative function of the WTO to respond to global trade policy changes” apparently received rather mixed support, as several developing countries seem to have argued about the dangers of extended roles for WTO committees.

In its proposal, the EU argued that “there is a growing interest of Members for environment and climate to figure more prominently on the WTO agenda.”

Brussels suggested that “members are increasingly stepping up national policies and measures to respond to climate and other global environmental challenges, such as climate change, loss of biodiversity and pollution.”

It argued that “there is a need to increase awareness about the way in which such measures are designed and of their impact on international trade. Increased transparency, dialogue and enhanced cooperation should be encouraged, as the WTO cannot ignore this crucial debate given its scale and urgency. Inclusive cooperation on trade-related environmental measures can also help to prevent trade conflicts.”

Consequently, the EU’s proposal sought “to reinforce deliberation on trade and global environmental challenges in the Committee on Trade and Environment (CTE), so that it becomes the key global forum for transparency, coordination and policy dialogue on trade-related environmental measures.”

It said that the discussions in the CTE “could cover engagement on trade-related environmental measures, the relationship between trade and the implementation of multilateral environmental agreements, and the promotion of sustainable development through trade.”

The EU said, “while recognizing the complex nature of some of these debates, the European Union intends to continue to feed into this crucial work through its current practice of offering transparency and discussion on its own climate-related Green Deal measures (e.g. the Carbon Border Adjustment Mechanism (CBAM), Regulation on deforestation-free supply chains, Eco-Design for Sustainable Products Regulation, etc.).”

But there appears to be a somewhat hostile response to some of the EU’s suggestions at the meeting.

While countries like Japan, Korea, and other developed countries seemed to have cautiously supported the EU proposal, the developing countries apparently expressed their concerns at the meeting

- Third World Network