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TWN
Info Service on WTO and Trade Issues (Oct21/19) Geneva, 18 Oct (D. Ravi Kanth) – The World Trade Organization’s director-general Ms Ngozi Okonjo-Iweala seems to have sparked-off yet another controversy, this time on the need to implement carbon pricing, said people familiar with the development. Even though the negotiations on the proposed “deliverables” for the WTO’s upcoming 12th ministerial conference (MC12) remains in dire straits, the DG appears to have shifted her focus to the 26th United Nations Climate Change Conference of the Parties (COP 26), which begins in Glasgow, Scotland, on 31 October. Ms Okonjo-Iweala’s article in the Financial Times on 14 October, titled “Adopting a global carbon price is essential”, has raised serious concerns as to why she seems to be in a hurry to push the interests of the developed countries, said people, who asked not to be quoted. Issues concerning the environment and carbon pricing are not part of the proposed mandated issues for discussion at MC12, which is scheduled to begin in Geneva on 30 November. Yet the DG seems to find it appropriate to spend intellectual capital on issues that are not part of the WTO’s proposed core “deliverables” for MC12, said people, who asked not to be quoted. In her acceptance speech on the day of her appointment as the DG on 15 February 2021, Ms Okonjo-Iweala had said that “we (members) should also work to ensure that the WTO best supports the green and circular economy and addresses more broadly the nexus between trade and climate change.” She went on to say in her speech that “trade and environmental protection can be mutually reinforcing, both contributing to sustainable development.” “Care must, however, be taken to ensure that any disciplines are not used arbitrarily or as a disguised restriction on trade, and that they take into account the need for developing countries to be assisted to transition to the use of greener and more environmentally-friendly technologies.” But eight months into office after making that speech, the DG has actually started calling for carbon pricing, notwithstanding the fact that there have been no negotiations on this issue during this period. As the chair of the Doha Trade Negotiations Committee (TNC), the DG is mandated to voice her concerns only on the mandated issues, India told the DG when she wanted to discuss the Joint Statement Initiatives at a TNC meeting (see SUNS #9340 dated 5 May 2021). The DG appears to remain silent on the mandated issues concerning the permanent solution for public stockholding programs for food security, the special safeguard mechanism for developing countries, an agreement on removing harmful fisheries subsidies, and an accord on improving special and differential treatment (S&DT) provisions in the ten Agreement-specific proposals tabled by the G90 group of developing countries, said people familiar with the development. Even in other areas covering the WTO’s response to the COVID-19 pandemic and other issues, which come under the mandate of the WTO’s General Council, there is no convergence at this juncture on the main issues including the TRIPS waiver proposal. While spending little time in Geneva in the past two weeks due to the informal trade ministerial meeting in Paris, followed by the G20 trade ministers’ meeting in Sorrento, Italy, the annual meetings of the World Bank and IMF in Washington DC, and now her visit to India this week, the DG appears to have virtually outsourced the negotiations to the respective chairs of the negotiating bodies as well as her four deputy director-generals, said people, who asked not to be quoted. CARBON PRICING Upholding the need for introducing carbon pricing in her FT article, the DG has argued that all countries, including the developing and least developed countries, should levy a price on carbon emissions in their country, in other words, they should tax their producers according to the extent of the carbon emissions of their production. According to Ms Okonjo-Iweala, “The most straightforward solution would be a global carbon price aligned with the Paris Agreement. This would help achieve our collective climate goals, and bring stability and fairness for cross-border business.” She justified the notion of taxing producers in developing and least developed countries on their CO2 emissions since many developed countries use this carbon pricing, which leads to “carbon leakage”, i.e., CO2 emitting-industries shifting out of countries which tax them and into countries where such a tax does not prevail, which are mostly developing and least developed countries. She further endorsed the Carbon Border Adjustment Mechanism (CBAM), which implies applying tariffs on products based on their CO2 emissions which enter the developed markets from countries where such carbon taxes do not exist. While there is no proof of “carbon leakage”, as she admits, her proposition of taxing producers in developing and least developed countries on their CO2 emissions and agreeing on global carbon pricing completely ignores the ground realities of the developing world. Lack of access to green technologies in most developing and least developed countries would imply that any further taxes on producers would increase their cost of production and limit their export capacities. This may lead to de-industrialization in the developing world and will be counter-productive to the structural transformation efforts of the developing and least developed countries, said people, who asked not to be quoted. While the DG seems to be worried about the shift of polluting industries out of the developed countries, adversely impacting employment and businesses in these countries, she appears to be oblivious of the impact of the CBAM on the exports of developing and least developed countries which are concentrated mainly in the sectors which have been identified as containing high CO2 emitting industries like textiles and clothing, leather and leather products, metal and metal products, plastics and plastic products, rubber and rubber products, mining, etc, said a trade expert, who asked not to be quoted. According to the DG in her FT article, “The challenge comes from the inconsistency of carbon pricing systems. Prices vary from less than $1 per tonne of CO2 in Ukraine to more than $130 per tonne in Sweden. Each sub-national, national or regional system works differently and has different sectoral coverage. Prices are often too low, considering the estimate by the Stern-Stiglitz Commission on Carbon Pricing that somewhere between $50 and $100 per tonne of CO2 is required to meet Paris Agreement temperature targets.” The DG, however, failed to mention what would be the implications of such a carbon price on manufacturing in the developing world, the expert said. According to the DG, “Yet developing countries, in particular, fear that border carbon adjustment could become a pretext for protectionism aimed at their exports, when they are not the core problem. Africa, for instance, contributes roughly 3 per cent of greenhouse gas emissions. From that perspective, poor regions of the world see this measure as unfair. This is no argument against carbon pricing. In every sphere of our economy, production and consumption are guided by price signals.” “Such an unabashed support for market mechanisms and price signals and a complete disregard of the structural transformation challenges faced by developing and least developed countries and the important role that states need to play to support the industrialization process proves that the WTO is an organization which designs trade rules to support big businesses and can in no way help the developing countries to use trade as a means of development,” the expert concluded. “We want cooperation to share technologies to combat climate change and not CBAM,” said a trade envoy, who asked not to be quoted.
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