Pascal Lamy, the Director of the WTO hints at how the WTO tool-box of rules can certainly be leveraged in the fight against climate change. Normally, the WTO has rules on product standards that encourage its members to use the international norms and this would be defined only by a consensual international accord on climate change that successfully embraces all major polluters. He uses the "food miles" debate to illustrate how far away both this global consensus is and our understanding of climate cause and effects.
Source: Business Daily (Nairobi) by Pascal Lamy
The issue of Climate Change intersects with international trade in a multitude of different ways. While the World Trade Organisation 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 "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 for instance.
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 "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.
For instance, some studies show that a Kenyan flower that is air-freighted to Europe emits a third 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 per cent less CO2 than lamb produced in the UK.
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.
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 mobilised under clearer environmental parameters that only the environmental community can set.
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 place.
The writer is the director-general of WTO.
The issue of Climate Change intersects with international trade in a multitude of different ways. While the World Trade Organisation 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 "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 for instance.
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 "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.
For instance, some studies show that a Kenyan flower that is air-freighted to Europe emits a third 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 per cent less CO2 than lamb produced in the UK.
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.
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 mobilised under clearer environmental parameters that only the environmental community can set.
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 place.
The writer is the director-general of WTO.
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