TWN Info Service on WTO and Trade Issues (Jan22/08)
20 January 2022
Third World Network

EU paper on trade & environment dismisses Brussels initiatives at WTO
Published in SUNS #9496 dated 20 January 2022

Geneva, 19 Jan (D. Ravi Kanth) – A policy brief commissioned by the European Union has argued that Brussels’ move to reassign “new environmental topics” to the World Trade Organization may prove “counterproductive”, cautioning the EU and the United States as well as their allies that the “WTO should not be perceived as an institution capable of solving important non-trade problems.”

Further, it said that pursuing trade and environment issues at the WTO would be harmful to developing countries.

The policy brief, titled “A Better Transatlantic Agenda on Trade and Environment” and written by Professor Steve Charnovitz of the George Washington University Law School, argues that “there is little evidence supporting the optimistic view that reassigning new environmental topics will succeed,” and they may prove “counterproductive”.

Commissioned with the support of the Erasmus+ Program of the European Union and Carlton University, the seven-page report argues that even though the Doha Development Agenda (DDA) contains certain environmental items such as improving market access for environmental goods and services as well as fisheries subsidies, the recent spate of controversial Joint Statement Initiatives (JSIs) to expand the WTO’s environmental agenda seem to have both positive and negative features.

Last month, a ministerial statement was issued by the EU and several other members endorsing the JSI on “trade and environmental sustainability structured discussions”.

In addition, the EU along with New Zealand, Norway, and Switzerland among others issued a ministerial statement on the phasing out of fossil fuel subsidies.

Furthermore, the EU along with the Ottawa Group members and some developing countries issued a ministerial statement on an “informal dialogue on plastic pollution and environmentally sustainable plastics trade.”

In his paper, Professor Charnovitz argues that, on the positive side, everybody agrees that “undertaking effective global action on climate change, fisheries, and plastics are all worthy goals for global governance.”

However, “on the negative side, one can doubt realistically that the WTO will be able to make a material contribution,” he argued.

Further, “there is little evidence supporting the optimistic view that reassigning new environmental topics to the WTO will succeed.”

And, “more likely, such allocation of jurisdiction to the WTO would prove counterproductive.”

More importantly, the “WTO should not be perceived as an institution capable of solving important non-trade problems,” says Professor Charnovitz, arguing that the WTO must address what he calls the “UPID” problems – “unilateralism, protectionism, isolationism, and discrimination.”

These are problems that notionally are amenable to international control, the author said, adding that “in my view, the WTO should stick to its constitutional mission to effectuate the goals of an open and rule-based trading system.”

DANGERS OF WTO TAKING ON ENVIRONMENT ISSUES

“Letting the WTO to do its own job”, says Professor Charnovitz, “is not only a good idea for the world economy, but is also a good idea for the global environment.”

Perceived “environmental mission creep for the WTO will cause serious indirect damage to the productivity of environmental regimes that have the jurisdictional and technical competence to formulate solutions,” he pointed out.

Thus, for fisheries subsidies, “the optimal place to solve an environmental problem is in the specific environment regime set up to address that particular problem. Thus, for fisheries, the solutions should be sought in the regional or global regimes that address fisheries management and illegal, unreported or unregulated (IUU) fishing.”

For climate change, he says, “the optimal solutions should come from the UNFCCC (United Nations Framework Convention on Climate Change).”

Ideally, the regulatory approach of the Paris Climate Agreement would have included some normative rule to allocate responsibility for GHG emissions occurring from imported products.

For plastics, the report says, “the ideal venue for solutions would be the trans-border regimes for waste (for example, the Basel Convention),” and even if it may be true that “the existing global regimes governing plastics are inadequate, the solution for that is to reform those regimes, not to out-source to the WTO.”

More importantly, “there are two additional reasons to prefer the environment regimes over the WTO as a venue for solving environmental problems.”

They include that “the DNA of environment regimes is transparency and stakeholder participation, two important features that are almost completely absent in so-called government-Member-driven WTO.”

Secondly, “giving the WTO new jobs to do will reduce the likelihood that the WTO will be successful in its real job which is promoting trade liberalization and managing trade relations.”

“These are important objectives for all countries, and especially for developing countries,” Professor Charnovitz argued.

Ahead of the WTO’s postponed 12th ministerial conference (MC12) in Geneva, which “already teeters on the precipice of failure,” the author asked “why should anyone seek to give the WTO a broader mandate on which to fail, or hand the WTO new excuses for failure?”

In summary, “the well-intentioned proposals for WTO disintermediation will likely fail both ecologically and economically,” he warned.

Finally, the author injected “two ideas into the debate: First, retrofitting the WTO into becoming an environmental agency is a wrong turn for both trade and environment. Second, enhancing transatlantic political and economic coordination is potentially very fruitful and long overdue.”

COMMONALITIES BETWEEN POLICY BRIEF & UNCTAD’S TDR

The policy brief written by Professor Charnovitz highlights the inadequacy of the WTO to act as an agency for tackling the environment challenges and emphasises that the role of the WTO should be limited to only trade issues.

The non-trade issues should be left to the relevant agencies to handle: for fisheries, the optimal solutions should come from the regional or global regimes that address fisheries management and illegal, unreported or unregulated (IUU) fishing; on climate change, the optimal solutions should come from the UNFCCC. Ideally, the regulatory approach of the Paris Climate Agreement would have included some normative rule to allocate responsibility for GHG emissions occurring from imported products; and for plastics, the ideal venue for solutions would be the trans-border regimes for waste (for example, the Basel Convention).

A similar message has also been conveyed by the latest Trade and Development Report (TDR) of the UN Conference on Trade and Development (UNCTAD) which argues that there is a need to de-link international trading rules from climate goals.

The TDR argues that while climate adaptation remains a priority for developing countries, greenhouse gas emissions in traded goods and services account for only 27 per cent of global carbon emissions.

This points to a rather limited scope for international trade policy to contribute to a global green growth agenda, with trade policy only serving as a complementary tool for attaining environmentally sustainable growth.

International trading rules have a much more limited role to play. International trading rules should be designed in a way that developing countries have the policy space to design the required climate adaptation policies without fearing a punitive action, said the TDR.

According to the TDR, incentive-based approaches, such as optional preference schemes that provide ring-fenced climate financing additional to ODA or preferential market access in exchange for progress towards nationally determined contributions (NDCs), could accelerate climate action without recurring to punitive measures with anti-developmental effects.

As a step towards such an arrangement, the international community could support initiatives to transform rules governing intellectual property rights, such as through a WTO Ministerial Declaration on TRIPS and Climate Change, with a view to expanding TRIPS flexibilities for developing countries in relation to climate-related goods and services.

This could provide a basis for innovative mechanisms for promoting access to patent-protected critical green technologies.

Other initiatives that could support this agenda include the open-sourcing of key green technologies as global public goods, said the TDR.

Both the TDR and the policy brief convey a strong message that the “WTO should not be perceived as an institution capable of solving important non-trade problems. Indeed, the question of whether the WTO is capable of solving trade problems remains to be answered.”

It has also been pointed out that the WTO is a government-member-driven organization and does not involve wide stakeholder participation which is essential for designing a climate agenda, as such an agenda can have both economic and social shocks.

As reported in the SUNS last year, introducing trade and environment issues is an apparent attempt to transform the WTO into a “plurilateral” trade organization.

After the postponement of MC12 on 27 November 2021 due to the emergence of the new Omicron variant of the SARS-CoV-2 virus, a flurry of non-mandated plurilateral ministerial statements have been issued in areas covering the Joint Statement Initiative (JSI) agreement on services domestic regulation, the JSI on trade and gender, the JSI on structured discussions on trade and environmental sustainability, the JSI on fossil fuel subsidies, and a JSI statement on the informal dialogue on plastic pollution and environmentally sustainable plastics trade among others.

As part of what appears to be a rather dangerous push towards turning the WTO, an inter-governmental and multilateral trade body, into a plurilateral trade organization, these JSIs constitute the biggest threat to advancing the interests of the developing countries in the coming years, said people, who asked not to be quoted.

The three ministerial statements on trade and environment that were issued on 3 December 2021 pertain to: (1) the structured discussions on trade and environmental sustainability; (2) phasing out of fossil fuel subsidies; and (3) an informal dialogue on plastic pollution and environmentally sustainable plastics trade.

WTO DG SUPPORTS JSIs ON TRADE & ENVIRONMENT

Surprisingly, the WTO director-general Ms Ngozi Okonjo-Iweala has not made any official comment on the three JSI ministerial statements, as she had done on the JSI agreement on services domestic regulation (see SUNS #9474 dated 6 December 2021).

Nonetheless, Ms Okonjo-Iweala had spoken in favour of these three initiatives in her very first statement made at the time of her appointment as DG on 15 February this year (see SUNS #9287 dated 17 February 2021).

In that statement (Job/GC/250), Ms Okonjo-Iweala said: “We 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 intervention that “trade and environmental protection can be mutually reinforcing, both contributing to sustainable development.”

Ms Okonjo-Iweala emphasized the importance of re-activating and broadening “the negotiations on environmental goods and services. This would help promote trust and encourage Members to explore further ways in which trade can contribute positively to an improved climate.”

She also said that “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.”

And, in tune with the European Union’s plans to impose a carbon border tax arrangement including the imposition of a carbon tax, Ms Okonjo-Iweala, in her article published in the Financial Times on 14 October 2021, had said “adopting a global carbon price is essential”.

In the FT article, she acknowledged that the “poor regions of the world see this (carbon border tax) measure as unfair.”

“This is no argument against carbon pricing,” Ms Okonjo-Iweala said.

“The most straightforward solution would be a global carbon price aligned with the Paris Agreement,” she said, suggesting that “this would help achieve our collective climate goals, and bring stability and fairness for cross- border business.”

In short, there is not a moment when Ms Okonjo-Iweala has not overly endorsed the elements revolving around the “carbon border tax arrangements” that have been pushed by the European Union and the United States, including their recent bilateral steel agreement, said people familiar with the development