> WTO news archives
> Speeches of former WTO Directors-General
The issue of Climate Change intersects with
international trade in a multitude of different ways. While the World
Trade Organization does not have rules that are specific to energy, to
the environment or to climate change per se, there is no doubt that the
rules of the multilateral trading system — as a whole (i.e. the WTO
“rule book”) — are indeed relevant to climate change.
Today, there are many different perceptions of
what the trading system ought to do on climate change. While some would
like to see the trading system curb its own “carbon footprint,” through
the greenhouse gas emissions it generates in the course of the
production, international transportation, and consumption of traded
goods and services; others would approach the issue differently.
Some would like to see the trading system
offset any competitive disadvantage they suffer in the course of climate
change mitigation. More specifically, they would like to impose an
economic cost on imported products at their borders equivalent to the
one they suffer in curbing their own emissions. In other words, a
“levelling of the playing field” of sorts, if you will, based on an
importing country's perception of how that field may best be levelled.
And, of course, there are many different ideas
floating on what these (quote unquote) “offsetting” measures may be,
with most of the discussion naturally focussing on countries' most
trade-exposed, energy-intensive, economic sectors like iron and steel
and aluminium. For instance, while some are considering the imposition
of domestic carbon taxes, with adjustment for those taxes at their
border; others are contemplating emission cap-and-trade systems, with an
obligation upon importers to participate in those systems.
Yet another group would prefer to focus on
what is most immediately “deliverable” — if I may say so — by the
trading system in terms of the fight against climate change. And by
this, they mean the opening of markets to environmental goods and
services; in particular to those that are relevant to climate change,
through the ongoing Doha Round of trade negotiations.
These are but a few of the ideas I have heard
so far on how some would like to position the multilateral trading
system on climate change. But there are other ideas for sure, and much
work is being conducted at the moment — in various quarters — on how the
WTO tool box of rules may be leveraged in the fight against this
environmental challenge. While some are looking at WTO rules on taxes,
others are looking at the rules on subsidies and intellectual property
My starting point in this debate is to say
that the relationship between international trade — and indeed the WTO —
and climate change, would be best defined by a consensual international
accord on climate change that successfully embraces all major polluters.
In other words, until a truly global consensus emerges on how best to
tackle the issue of climate change, WTO Members will continue to hold
different views on what the multilateral trading system can and must do
on this subject.
There is no doubt that trade regulations are
not, and cannot be, a substitute for environmental regulations. Trade,
and the WTO toolbox of trade rules more specifically, can — at best -
offer no more than part of the answer to climate change. It is not in
the WTO that a deal on climate change can be struck, but rather in an
environmental forum, such as the United Nations Framework Convention on
Climate Change. Such an agreement must then send the WTO an appropriate
signal on how its rules may best be put to the service of sustainable
development; in other words, a signal on how this particular toolbox of
rules should be employed in the fight against climate change.
Absent such a signal, confusion will persist
on what would constitute an appropriate response by multilateral trading
system. Let us take the issue of the international trading system's
carbon footprint for instance. Much is said in the press everyday about
the carbon footprint of international transportation. In fact, a new and
emerging concept is that of “food miles.” In other words, the desire of
consumers in certain countries to calculate the carbon emitted in the
course of international transportation, with many already drawing the
conclusion that it may be better to (quote unquote) “simply produce
goods at home” to minimize emissions.
But that argument does not always stand up to
empirical verification. In fact, 90% of internationally traded goods are
carried by sea. And maritime transport is by far the most
carbon-efficient mode of transport, with only 14 grams of CO2 emissions
per ton kilometre. Shipping is followed by train transport, then road
transport. Air transport has by far the highest CO2 emissions per ton
kilometre (a minimum of 600 grams), illustrating the high relative
climate impact of such transport.
In addition, various studies conducted on the
“carbon mileage” of traded goods, have shown that the issue can often be
counter-intuitive, if I may say so.
For instance, some studies show that a Kenyan
flower that is air-freighted to Europe emits 1/3d of the CO2 of flowers
grown in Holland.
Others show that New Zealand lamb that is
transported to the United Kingdom can actually generate 70% less CO2
than lamb produced in the UK.
Similarly, some of the fertilizers produced in
the United States and transported to Europe can generate 13% less CO2
than fertilizer produced in Italy. And so on.
Now, I am not saying that this will always be
the case, but surely then, this is an issue in need of case-by-case
analysis, and empirical verification. In the case of food, in
particular, we must not ignore the cost of greenhouses in colder
climates, and of energy-expensive out-of-season storage.
Only a multilateral approach to climate change
would allow us to properly address these issues. A multilateral
agreement, that includes all major polluters, would be the best placed
international instrument to guide other instruments, such as the WTO, as
well as all economic actors on how negative environmental externalities
must be internationalized. Only with such an instrument can we move
towards the proper pricing of energy.
Similarly, only such an accord could act as a
proper arbiter of the measures that are indeed environmentally necessary
at a country's border. In fact, an effective multilateral solution to
climate change could and should do away with the need to (quote unquote)
“offset” competitive disadvantages, when countries perceive themselves
to be making equitable emission reductions. In other words, to be
operating within an environmental architecture that would itself
successfully level the playing field, based on recognized principles of
international environmental law such as Common but Differentiated
Now, in working towards an international
accord on climate change, countries will certainly have to reflect on
the role of international trade within such an accord. Trade leads to
efficiency gains, allowing countries to specialize in what they are best
at producing. And trade also leads to economic growth, offering
countries the possibility of investing this growth in pollution
prevention and abatement if they take the political decision to do so.
But for the benefits of trade to truly materialize; in other words, for
its efficiency gains to also translate into fewer greenhouse gas
emissions, the right environmental context must be set for trade. In
other words, energy must be properly priced, and production processes
adjusted accordingly. It would then be incumbent upon the trading system
to respond to such environmental rules as soon as they are crafted.
The WTO tool-box of rules can certainly be
leveraged in the fight against climate change, and “adapted” if
governments perceive this to be necessary to better achieve their goals.
The WTO has rules on product standards for instance, that encourage its
members to use the international norms set by more specialized
international institutions. The WTO has rules on subsidies, taxes,
intellectual property, and so on. All of these tools can prove valuable
in the fight against climate change, but in that fight, would need to be
mobilized under clearer environmental parameters that only the
environmental community can set.
In the absence of such parameters, the WTO
will continue to be pulled from left to right by different players, with
only a faint possibility of landing in the center! Each of its members
will have a different interpretation to offer on how the playing field
may best be levelled. And I would caution against such an outcome; the
world could end up with a real spaghetti bowl of “offsetting” measures
that achieve neither nor trade nor environmental goals.
There is no doubt that an immediate
contribution that the WTO can make to the fight against climate change
is to indeed open markets to clean technology and services. The Doha
Round of trade negotiations offers an avenue for expanded access to
products such as scrubbers, air filters and energy management services.
But, as can be expected, what is and is not an environmental good is a
topic that is hotly debated.
For economists, matters appear to be clearer.
They tell us that, today, the global market for environmental goods and
services is estimated to be worth more than $550 billion dollars every
year. The OECD estimates that green services account for 65% of this
market and green goods 35%. Climate change prevention and mitigation
products and services represent an important proportion of these
Launched within a broader context of the Doha
Round's environmental chapter, which also includes issues such as the
reduction of fisheries subsidies, and enhancing the mutual
supportiveness between WTO rules and multilateral environmental
agreements, the negotiations on environmental good services could
deliver a double-win for some our members. A win for the environment and
a win for trade.
For a country such as Indonesia, that is
amongst the world's top 10 exporters of steam condensers, this mandate
can represent such a double gain.
The same for India, that is amongst the
world's top 10 exporters of hydraulic turbines; or Malaysia that is
amongst the world's top 5 exporters of photovoltaic cells; or Thailand
that is amongst the world's top 10 exporters of filtering and purifying
machinery for gases.
Surely we should not miss an opportunity to
open markets for clean technology and services in the Doha negotiations.
But, in doing so, we should cognizant of the fact that, ultimately, it
is the existence of environmental regulations that will drive demand for
these goods and services. Hence the importance, once again, of setting
the right environmental framework within which market opening can take
A multilateral approach to climate change,
that centers on collective action, is absolutely key.
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