The WTO in the emerging energy governance debate

Gabrielle Marceau
Counsellor, Legal Affairs Division, WTO


This article looks at the relevance of existing WTO provisions with respect to trade in energy. As this WTO report is on trade in natural resources, a brief discussion on the relationship of “trade in natural resources” with “trade in energy” would seem appropriate. We can make distinctions between “trade in natural resources needed to produce energy”, such as trade in fuels, and “trade in energy,” itself, such as trade in electricity or in nuclear energy, which usually takes place between two neighbour countries. This latter form of trade is reported not to be very large empirically. On the other hand “trade in natural resources needed to produce energy” (especially trade in oil, gas, coal) is huge and corresponds more clearly to the classical GATT/WTO trade in goods. This article does address the distinctions between “trade in natural resources needed to produce energy” and “trade in energy” in any depth but rather focuses on how WTO rules would relate to both.

This article argues simply that — although they were not initially designed per se to address trade in natural resources needed to produce energy or to direct trade in energy — a number of existing rules of the GATT and of the WTO nonetheless would seem to be relevant and applicable to both. Additional rules in this regard are also being negotiated in the context of both the WTO accession of energy-producing Members and of the ongoing Doha goods and services negotiations. This paper reviews how WTO rules apply or may apply to energy-related matters and the main issues and concerns that WTO Members should reflect upon.

An important preliminary issue is to define what we mean by ‘energy’ or ‘trade in energy’ or ‘energy trade’, a term that is not used anywhere in the WTO treaty. Should we define energy in terms of products like oil, gas, electricity, hydrocarbons, biofuels, firewood and charcoal, or in terms of their use? The article suggests that we define energy as the action (product and process) through which energy-containing natural resources are transformed and consumed in response to a series of societal and individual human requirements for heat and power. However, such definition is not entirely sufficient for WTO purposes as it does not fall neatly, within the goods/services parameters of the WTO. For example, is energy in the form of electricity a good or a service ? This is important as WTO rules treat goods and services differently.

The WTO has rules on trade in goods, trade in services and on trade-related intellectual property rights.

The GATT/WTO sets out rules prohibiting unjustifiable discrimination, and import and export bans, on trade in all products — past, present and future. To the extent that an energy source (oil, natural gas, or coal, for example) is in the form of a product, then all WTO provisions that contain disciplines on trade in goods are applicable. In addition, the GATT/WTO has relevant disciplines on transit, on subsidies with special rules on agriculture subsidies, on customs matters, on state trading enterprises actions, on standards; the GATT contains flexibilities for preferences for development or with regional trading partners, and for the use of policies other than trade (like the protection of the environment). All these provisions would be applicable to trade in natural resources or trade in energy when in product form when assessing the compatibility of governmental measures affecting trade opportunities.

The WTO has also rules applicable to trade in services contained in the GATS: all rules of GATS are potentially applicable to the operations of energy-related services. Under the GATS, all Members are bound by a number of general obligations and disciplines, among which the MFN principle (Article II) is the most important discipline for energy-related services. The GATS however does not impose on any Member the obligation to accept foreign services and services suppliers in its market (e.g., to give access to its national oil service market). The GATS contains other disciplines (like on monopolies) and flexibilities (RTAs, general exceptions etc) that are also relevant to trade in energy services.

The development of new technologies, effective access to technology, and appropriate choices in applying technologies — is central to the debate about the energy sector, its impact on the environment and its role in fulfilling development aspirations. And this bring the TRIPs Agreement to the front line of the debate over the need for energy efficiency.

The WTO Agreement has a very broad scope of application and reach over several energy related commercial activities. While most people agree that generally WTO rules apply to trade in natural resources — and they can point to the very first WTO dispute about Brazil and Venezuela exports of gasoline to the United States — it is difficult to determine ‘how’ the old GATT rules and today's WTO disciplines actually apply to the specific operations of trade in energy.

In sum, whether WTO Members should develop — in the WTO or outside the WTO — a new dedicated framework for dealing with energy-related trade issues is an open question. But what seems clear is that, since there are already several WTO disciplines that are applicable to trade in energy, if States negotiate rules on trade in energy outside the WTO, they will necessarily have to reflect on how to bridge the existing WTO energy-relevant provisions with other non-WTO energy related provisions. And if energy negotiations take place within the WTO, Members will also have to reflect on the implications of the WTO Single Undertaking, whereby Members are expected to comply with all their WTO obligations simultaneously. Therefore, if, for instance, WTO Members want to adopt special rules on energy subsidies (as they did with agriculture subsidies), they would have to decide collectively on how the new specific rules applicable to energy-subsidies would relate to the general and the specific agriculture rules on subsidies.

Finally, we cannot ignore the pollution and climate-change dimensions of this energy debate. Our climate change problems are the consequence of our misuse of polluting forms of energy. Although this paper does not dig into this specific issue, trade and climate change are also clearly covered by several WTO provisions.