Reconciling Trade and Climate

Economic development has constituted the only major motivation behind any government policies in the last century, where international trade has been  the main element in ensuring the growth at...

Economic development has constituted the only major motivation behind any government policies in the last century, where international trade has been  the main element in ensuring the growth at national level. Nevertheless, the increasing danger of climate change problems has forced government to revise its policies to strike a balance between climate and trade. Yet, it is extremely difficult to achieve international consensus concerning the issue, as countries are unwilling to compromise on economic growth to avoid climate deterioration. Therefore, an international institution must take charge in order to force negotiations as well as commitments that deal with trade and climate respectively.

Since the 1980s, concerns about global warming and the influence of human activity on this phenomenon have emerged, which led to the creation of the InterGovernmental Panel on Climate Change (IPCC), an international attempt to consolidate the scientific community. The increasingly consensual view of the IPCC is that “human activities are making a discernible contribution to changes in our climate”. The current UN Secretary-General Ban Ki-Moon has stressed the importance of promoting “policy coherence between the economic, financial and trade systems and environmental sustainability, including the climate change agreement”, in order to achieve the sustainable development goals.

Even though, the importance of responding to climate change was globally recognized in 1992, governments are still debating concrete commitments despite the implications of missed deadlines and the urgent need for action. Unfortunately, when it comes to global governance, governments were unable to avoid a non-cooperative equilibrium approach when trying to maintain international cooperation. A core factor constraining international cooperation is reaching an international consensus on how best to finance effective responses as well as the burden sharing among states to meet the costs of compliance. Challenges related to the transfer of technology necessary for climate mitigation and adaptation, which also concerns the management of intellectual property in addition to priorities, costs of risks along with the timing and scale of their potential impacts that are different whether on the regional or national level have yet to be addressed.

Climate change could have have impacts on trade as well, for example affecting infrastructures like harbours because of rising sea levels. In fact there is a legal linkage between climate change and trade governance, primarily when it comes to the competitiveness impacts, for instance when governments put carbon pricing mechanisms in place. That is why developing countries are concerned about the potential effects of climate measures taken by developed countries on the exports from them. Therefore, states made commitments under the Kyoto protocol and the UNFCCC auspices to minimize adverse economic, social and environmental impacts on developing countries when responding to climate change (so called response measures).

Developing countries such as China are justifying their emissions on the basis of the provision of the United Nations Framework Convention on Climate Change (UNFCCC) which states that its “[p]arties should protect the climate system . . . on the basis of equity and in accordance with their common but differentiated responsibilities and respective capabilities.” In this context, the developed countries must assume higher responsibilities than developing countries as they were the major polluter in the last century while developing countries have the right to reach the same economic development of developed state on the expense of the climate.

World Trade Organization (WTO) members are aware of the impact of multilateral negotiations on environmental goods and services in reaching climate change mitigation objectives.  That is why, a major shift has occurred where states have submitted proposals related to environmental protection instead of  goods and services, mainly those pertinent to climate change, including a proposal to link the negotiations with the Clean Development Mechanism (CDM). The proposals reflects an urgency among the members  to address the enormous challenges of climate change while supporting the growing global acknowledgment of the link between climate change and trade and the call to direct the negotiating focus on climate-friendly goods and technologies. The debate needs to solve the issues of non-tariff barriers in particular labeling, yet there is a lack of proposals despite the latters presented by Japan and Brazil in 2010.

Moreover, Aid for Trade concepts have emerged in order to help developing countries to cope with the climate change challenge. Aid for Trade aims at making developing countries more resilient towards climate change through adaptation and mitigation projects such as  building economic infrastructure and institutions to improve the country’s ability to trade and its flexibility to shift towards a low carbon economy.

What is more, article XX of the GATT agreement of 1947, explicitly allows for exceptions to its trade rules to protect health and conservation of resources while the Preamble to the Marrakech Agreement that established the WTO in 1995 recognizes the importance of seeking “to protect and preserve the environment”. In the last decades, arguments have emerged before the dispute settlement body of the WTO by countries challenging other countrie’s measures that were implemented for environmental reasons on the basis of the afore mentioned article. A brief examination of these cases highlights the fact that the WTO panels and appellate bodies are increasingly recognizing the importance of striking a balance between environmental concerns and trade policies even if the ruling would prioritize the environment on the expense of trade liberalization.

Thus, the WTO is the most convenient international organization to handle the issue of reconciling trade and climate in particular under article 20 and the jurisprudence of the dispute settlement bodies.  Moreover, despite the failure of the DOHA round, the WTO constitutes the only international organ that has the capacity to lead the negotiations among countries concerning climate change and environmental goods that might result in an international consensus on the issue at stake.

Imad Ibrahim

Imad Ibrahim is a PhD Candidate at Sant’Anna School of Advanced Studies, Pisa, Italy. In his Phd thesis, he examines the issue of transboundary groundwater governance from a legal perspective. He is specialized in energy, water, environmental and climate change law and also deals with matters related to international trade and intellectual property rights. He has been working for the last 3 years as a Research Associate at the think tank Global Law Initiative for Sustainable Development (gLAWcal). He is also an EU commission Marie Curie Fellow at Tsinghua University and at Beijing Normal University (Beijing, China) and Energy policy expert at the Lebanese Oil & Gas Initiative – LOGI, Beirut Lebanon. Imad holds a Master in European Interdisciplinary Studies from the College of Europe and an LLB with a specialization in European, French and Lebanese Law from the Lebanese University, Beirut.
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