Ladies and gentlemen,
In 2007, I attended the Trade Ministers’ meeting in Bali on the
relationship between trade and climate change. In Bali, I sent a simple
message: climate first, and trade second. And that message still
stands today. It was, and continues to be, a message that is designed to
uphold the Copenhagen Climate Summit at the end of this year.
Ladies and gentlemen, the climate crisis that
we are witnessing today is the single biggest challenge to civilization
as we know it. Responding to that crisis is urgent, and is a top
priority on the international agenda. Because that crisis is so serious,
responding to it requires that we unleash all our resourcefulness and
While the multilateral trading system has a
key role to play on the international economic and political landscape,
that trading system is designed to enhance, and not reduce, human
welfare. It cannot stand as a barrier to the fight against climate
change — in particular, to the conclusion of a “global” environmental
My message in Bali, therefore, was that
climate negotiators needed to conclude an international treaty from
which the WTO would take its cue. To truly enhance human welfare, the
trading system needs to respond to the signals that would be sent to it
by a successful Copenhagen accord. A trading system that ignores the
emerging carbon price — that ignores the damage to our planet that
greenhouse gas emissions cause — would reduce our welfare. No wonder
then that the creators of the WTO enshrined the concept of Sustainable
Development, right in the Preamble of the WTO accord.
Now, I must confess to you, that back in Bali,
my message was greeted with a sense of relief by the environmental
community. Many environmentalists had anticipated a heavy-handed WTO — a
“GATTzilla” as we were once called. One that would step into the climate
debate clumsily to impose its “trade-will” on the whole. Instead, they
found a compliant WTO. One that was willing to greet with open arms a
new international climate accord.
But I must explain to you why this position
was as necessary for the WTO back then as it is now. And, this, despite
the fact that, since Bali, various academics and government officials
have informally knocked on my door to ask that I revisit that message.
Why do they wish to see this message revisited, you may very well ask.
Because, they say, in some quarters, unilateral legislation is being
crafted, to fight climate change, that may include trade measures. And
those who see themselves as the targets of these measures would like the
WTO to reign them in. While those who are themselves crafting these
measures would like the WTO to bless them.
My response to them has been as follows.
First, that it is important to distinguish between the climate
mitigation measures that exist today, and those that are still being
contemplated. Within the cap-and-trade schemes some have either already
introduced, or may introduce in future, various flexibilities to reduce
the compliance pain for their industries. The free allocation of
pollution permits is one such example, and could be WTO-related.
Others are contemplating “border adjustments”,
of various sorts, for the future. These measures may take the form of a
requirement upon importers to purchase pollution permits at the border,
or of carbon tax, to encourage exporters to account for their emissions.
Options of this nature are embodied in European climate directives, and
in some of the bills currently being contemplated in the US. With the
Waxman-Markey and Boxer-Kerry bills being the most recent.
These “border measures” stem from the
philosophy that since the Copenhagen Summit may fail, the “first-movers”
on climate change must themselves take action to “level the carbon
playing field”. They must offset the competitive disadvantage that their
industry may suffer from enduring the costs of climate mitigation.
Intertwined with the competitiveness argument,
which is the dominant argument in most political discourse, is the fear
of “carbon leakage”. The fear that carbon emissions will simply shift
from the part of our planet that will take commitments to the part that
will not, thereby negating the environmental benefits.
Clearly, therefore, some countries are hedging
their bets against the failure of a Copenhagen accord. But should this
hedging of bets translate into a “trade first, climate second” solution
— as some of my visitors have suggested? I would say no.
Ladies and gentlemen, there is no better way
to offset a competitive disadvantage, or to fight carbon leakage, than
an international accord that includes as many players as possible. Will
a simple tax at the border here, or a simple requirement to purchase
pollution permits there, level the carbon playing field? If taxes and
permits could do the job, I can assure you, the world would have never
embarked on the long road to Copenhagen!
It is precisely because no form of unilateral
action can solve climate change - it is because no form of unilateral
action can fully address the competitiveness problem - that we need to
bring everyone onboard. This should reinforce the call for a Copenhagen
But some have also come up to me in recent
days to suggest that the WTO needs a climate-specific “subsidies code”.
With their principal concern being, of course, the free allocation of
pollution permits. My response has been to say: tell me exactly where
you think that the shortfall lies in current rules. Ladies and
gentlemen, these issues need to be responded to with clarity, before we
send negotiators from 153 members down a negotiating trail.
And let us be under no illusion. If there is
no accord in Copenhagen or soon afterwards, an accord in the WTO on the
trade measures that may be used to fight climate change will be
extremely difficult to reach. Why? Because many would resist that trade
be used as the international bargaining tool, and the source of
leverage, that would define the contours of the climate debate.
This takes me to my next message: the
relationship between trade and climate change must not exclusively be
viewed through a negative prism, there is tremendous scope for
complementarity between a climate agenda and trade agenda.
First, let us all recall that the WTO has an
environmental negotiation taking place as we speak. Part of the Doha
Round of trade negotiations includes a chapter to accelerate market
opening for environmentally friendly goods and services. Many
climate-friendly goods and services are being penalized upon
importation, rather than encouraged, and this is a situation that we
But there is further scope for complementarity
between a climate and a trade agenda. The International Energy Agency
has highlighted many trade barriers that stand in the way of the Clean
Development Mechanism. They include clean technologies that get stuck at
the border, and which do not reach CDM projects on time, either because
of tariffs, non-tariff barriers, or cumbersome customs procedures.
Let us join hands in addressing these barriers
at the WTO. All the CDM issues that I have mentioned are addressable
through existing WTO rules and the current Doha mandate.
Allow me to also mention that the WTO has
recently issued a joint report with the United Nations Environment
Programme on the relationship between trade and climate change. The
report is intended to show the many linkages that there can be between a
trade and a climate agenda. While the press seized on the border tax
portion of the report, since it is the “sexiest” of the linkages, such
taxes were hardly the core. I would encourage you to appraise yourselves
of this report.
Ladies and gentlemen, some final thoughts
before I close. Climate policy-makers tell me that the world has never
been closer to a global deal. Today, both developed and developing
countries alike want to tackle climate change. It is the details of how
they do so that remain to be closed.
The climate negotiation has my full support.
Part of that support will continue to manifest itself in not reducing
the climate agenda to one on trade.
Plan A is a world in which clear climate
commitments are assigned to all — under common but differentiated
responsibilities — and where the WTO toolbox is only explored at the
Plan B is a unilateral, go-it-alone approach
to climate change, that mistakenly places the implementation toolbox at
centre stage. We must fight for the only real plan that we have, which
is Plan A.
Thank you for your attention.