The World Energy Council is pleased to have an opportunity to address
the relationship between international trade and natural resources. Our
focus here is on trade in energy goods and services. We will leave aside
the precise definition of “energy”, but in what follows, we assume that
it covers not only traditional forms of energy, such as hydrocarbons,
but also renewable energy forms, such as biofuels, wind, solar, but
importantly on the range of products and services which are themselves
traded and/or which are otherwise involved in transborder movement.
Historically, neither the GATT nor the WTO Agreement were considered as
having a direct bearing on international energy trade. Trade in
hydrocarbons, fissionable materials and cross-border transmission of
electricity largely took place outside the multilateral trading system.
The GATS covers only limited kinds of energy services and doesn’t
address these comprehensively or in terms of sectors. While a few
discrete issues involving energy goods reached the GATT and WTO dispute
settlement stage (Reformulated Gasoline for example), these were
Another reason why energy trade and GATT/WTO rules seemed to largely
operate in isolation from one another was that, for the most part, these
agreements contain rules of general application. Neither refers to
“energy” or deals specifically with energy matters, although the
coverage of the GATS includes market access commitments on various kinds
of services equally pertinent to the energy sector.
Even though there are structural elements in the energy sector that
differentiate it from issues involving typical goods and services trade,
there are important developments that show a convergence between the
international energy business and the rules embodied in the WTO regime.
The first is the accession and impending accession of major
oil-producing States to the Organization. Saudi Arabia is now a WTO
member and Libya, Algeria, Russia and other oil producers are waiting in
the wings. The accessions of these producing States may well change the
dynamics of the WTO as an organization.
The second is climate change and the recognition that progress in
reducing greenhouse gases through the UNFCCC and various national
measures directly engages the application of WTO rules. This was an
important issue at the recent COP meeting in Copenhagen in December
Recognizing the changing picture globally and the interrelationship
between energy, trade rules and climate change, the WEC began addressing
these matters over the last three years: first, by inviting the
Director-General of the WTO to address the World Energy Congress in Rome
in 2007; and second, by appointing a Task Force to undertake an
examination of trade and investment rules for energy, leading to its
first report in September 2009.
World Energy Council Task Force Report
Using some of the comments of the Secretary General at the Rome Congress
as a point of departure, the Task Force report stresses the importance
of WTO rules for maintaining open energy markets, more crucial than ever
in the context of the current recession and of efforts aimed at
stimulating global economic recovery. The Report also signals the
benefits of completing the Doha Round, particularly as a means of
promoting trade in energy-related goods and services in general and in
climate-friendly goods and services in particular, both of which can
assist in the economic recovery and in GHG reduction through stimulating
exchanges in “green” technologies.
Where does all of this take us today?
Responding to the question whether the WTO can play a role in
encouraging “a more efficient management” of energy resources, it is
possible to propose three guiding principles. The first, taking a cue
from the Doha Development Agenda, is that open trade in energy goods and
services is indispensible for economic progress generally and for
meeting the needs of developing countries in particular. There is thus
an intertwining of trade in energy and issues of economic development as
parts of a whole.
The second, is that, to meet economic development objectives, energy
markets must be allowed to operate as efficiently as possible. This
requires a rules-based system that guarantees the operations of market
mechanisms through non-discrimination (meaning national and
most-favoured-nation treatment), regulatory transparency and access to
fair, open and impartial adjudicative processes. These rights and
obligations are embedded in the WTO system and, because of that, the WTO
and the interests of the energy sector converge.
The third principle is to recognize structural factors unique to the
energy sector constrain or at least qualify the full application of WTO
rules, the most important being that energy resources typically belong
to the State and that many countries have structured their petroleum and
electricity sectors around state owned enterprises. State ownership and
sovereignty interests differentiate energy goods from typical goods and
services in international trade. This affects any consideration of an
enlarged role of the WTO in this area.
Applying these principles, the report recommends that WTO members take
two specific actions that can be negotiated immediately:
First, as the global community looks for solutions to the challenge of
climate change, we believe agreement to reduce trade barriers and open
markets in energy services, including environmentally-friendly goods and
services, should be pursued as a priority. We believe such action should
be within the WTO and be as broadly-based and cover as many like-minded
countries as possible. If the Doha Round cannot effectively bring
closure on this subject, a possible plurilateral accord on energy
services within the WTO would make an important contribution to global
“governance” in this area.
Second, in ongoing consideration under the UNFCCC and elsewhere, it will
be important to ensure the integrity of the rule of law under the WTO
Agreement, both to ensure stability of international energy markets and
to promote the realization of global development priorities under the
principles referred to above. The WTO should bring its unique expertise
to bear on the question of what, if any, forms of border measures could
legitimately be applied by countries that adopt domestic greenhouse gas
With rapid changes in the sector, combined with challenges of climate
change, a more comprehensive discussion by the international community
of this and other areas of potential WTO “governance” relevant to energy
markets would be useful.
WEC is pleased to have had the opportunity to submit these
recommendations and would be pleased to provide support to further work
in these areas.
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