“Energy and the WTO”

> Pascal Lamy’s speeches


Ladies and gentlemen,

Thank you very much for having invited me to the XXIst World Energy Congress. I had participated in your previous Congress in Rome, which was held in November 2007. You have also participated in the WTO Public Forum yesterday — and it is indeed the Public Forum that has kept me here in Geneva. The joint WTO-WEC session in our Public Forum echoed some of the very interesting discussions that you have been having in Montreal.

Now, in 2007, my principal message to you was that more predictable and transparent trade rules in the energy field could benefit both energy producing and consuming nations.

Today, I would like to take that message further. To fine-tune it in light of the report that has been recently issued by the Task Force of the World Energy Council on “Trade and Investment Rules for Energy.”

I read the report with great interest, and certainly welcome the support it expresses for the Multilateral Trading System throughout its many pages. But I also see in the report a hope that the Trading System will be able to do more for the energy sector.

I thank your Task Force for making the point that the international community has yet to take a strategic approach to the rules of the Multilateral Trading System with respect to energy trade. While several portions of the WTO “rule-book” so-to-speak are relevant to energy, they remain relatively scattered, with little over-arching global policy consensus or goal. A stronger WTO rule-book could benefit the energy sector, because just as with any sector where trade is feasible, trade restrictions are feasible too. The WTO tackles these restrictions as its daily business.

So what could be the goal then? Well first, we must recognize that what we have before us is a complex web of trade-restrictive practices by state-trading enterprises; subsidies; export restrictions of various sorts; restrictions on transit; on investment; on the movement of energy service providers; and more. The WTO rule-book addresses some of these issues, sometimes deliberately, but other times only by default.

Now you, in the World Energy Congress, have defined your goals around three As: “Access,” “Availability” and “Acceptability” of energy sources. Another way to call these issues is “long-term energy security.” Were long-term energy security to also become the defining principle of energy trade rules, what would those rules look like?

The word “long-term” would suggest to me that social and environmental goals would need to be at the heart of those rules. Today, 2 billion people do not have access to commercial energy and 1 billion only have what is termed as “periodic” or “unreliable” supply.

Clearly, the poor must see their access to energy increased. This will happen when their levels of poverty decline, so part of the answer lies in economic growth. But it will also happen if we can make energy cheaper, which enhancing access, at the international level, to different energy providers.

Similarly, today the energy issue cannot be divorced from the climate crisis that our planet is facing. We need to reconcile the fact that the world will clearly need more energy, with the knowledge that our current patterns of energy-use are harming our planet. The answer can only lie in greater energy efficiency, renewable sources, and improved lifestyles.

Energy security also implies that energy supply must be allowed to expand and to travel more readily from countries where there is surplus, to countries where there is demand (just as with any other natural resource). We all know, of course, that traditional sources of energy are heavily geographically concentrated. A clear element of energy security would reside in the predictability of energy supply. A sense of certainty that supply will be sufficient and available, and will not simply be cut-off. This while striking a balance, of course, between the needs of energy exporting and energy importing countries.

A more sophisticated WTO rule-book could actually take us closer to these goals. Having said that, trade policy would still need to be couched in the midst of many other accompanying policies, in both the social and environmental spheres. For instance, it is not the rule-book of international trade that will decide “how” energy gets distributed within a country, or the ownership of natural resources. Nor is it that rule-book that will ensure that environmental regulations are put in place. The need for accompanying policies will remain.

The Doha Round of trade negotiations, behind which your Task Force has thrown its full support, could be considered a first stepping stone towards the emergence of a customized approach in the energy field. Towards greater energy trade security. It would build on existing disciplines, such as the non-discrimination principle, that forms the backbone of the WTO system as a whole.

And if successfully completed, it could open the door for a more holistic approach, possibly encompassing new issues such as competition policy. With the changing composition of the WTO's membership, and with energy exporting countries, such as Russia and Algeria negotiating their accession, the imperatives could become stronger to address the energy sector more fully.

To give you a flavour, the Doha Round will reduce tariffs on various renewable fuels (such as ethanol and biodiesel) and the equipment involved in energy production and distribution; will improve WTO subsidy disciplines; will improve the rules for transit under the Trade Facilitation chapter of its negotiation; will open energy services in areas such as drilling, engineering, technical testing, pipeline construction, and distribution; and will accelerate trade opening in energy-efficient and climate friendly technologies.

The latter, as you will have often heard me say, is a low-hanging fruit. Today, the global value of the environmental goods and services industry is estimated to be around US$800 billion, making it comparable in size to the aerospace and pharmaceutical industries. Solar panels, fuel cells, and climate consultancy services, are but a few examples of what is on the WTO negotiating table. Barriers to the trade of these technologies penalize the planet.

Through more open markets, greater competition, and the spread of clean technology, the Doha Round would help stabilize the international trade and investment landscape in the energy field.

Having said that, the Doha Round will not provide an answer to issues such as export taxes. In addition, the many trade policies, that are being contemplated in the climate sphere, may require examination at a future date. I refer here to border measures that some countries may apply to manage carbon leakage, or offset competitive disadvantage arising from the carbon constraints imposed on production. How permits are allocated within carbon markets may also need to be explored. The Doha Round would only be the beginning of what the international community may need to do.

Now, I would be remiss if I did not draw your attention to this year's World Trade Report of the WTO, that has been devoted to natural resources. I would strongly recommend that the Congress examine the report, because of its clear relevance to energy. You may also wish to note that the oil crisis of the 1970s had already placed the issue of export restrictions in the energy sector on the Tokyo Round's negotiating table. But this, without success. Later, the Punta Del Este Declaration, that launched the Uruguay Round, initiated negotiations on Natural Resource-Based Products, leading to controversial and unresolved discussions on energy.

Let us remember that in the WTO, it would be neither the Secretariat, nor the Director-General, that could mandate negotiations, nor even make proposals for their initiation. This is the prerogative of WTO members, and they would need to forge the necessary consensus to set the negotiating machinery in motion.

Coming back to the themes of your Congress, I note that to your three As, you have now also added a fourth, which stands for policy “accountability” in the energy field. By placing international trade under that goal, your message is loud and clear. A global framework for trade in energy would bring accountability to a sector where various types of barriers remain “unaccounted” for. As your Task Force has put it (I quote): “the global economy requires concerted efforts to ensure that markets remain open to energy goods, services, investments, and movement of personnel” (unquote).

A basic point that may enable you to convince the WTO to address energy more fully, would be to reassure its members that in so doing, they would not be ceding sovereignty. Quite to the contrary, they would be sovereignly deciding to create a more reliable international system for trade in energy. Bringing greater law and order to this complex field could turn out to be one of the best sovereign decisions ever made. Thank you for your attention.

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