What connects the ongoing COP28 Summit being held in the United Arab Emirates (UAE) and the 13th Ministerial Conference of the WTO (MC13), scheduled to be held in February 2024 in the same country?
In both these high-profile meetings (MC 13 and COP 28), one theme is likely to figure prominently in the discussions — the role of international trade and trade rules in making a positive contribution to addressing climate change. What could be the implications of this deepening of trade and environment linkage for India and other developing countries?
Indeed, environmental issues are not alien to the WTO. In fact, the Committee on Trade and Environment at the WTO provides a forum for discussing trade and environment issues. But the committee does not have the mandate to negotiate new trade rules. It is apprehended that the outcome of the deliberations during the Trade Day held on December 4 will seek to prod climate change negotiators at COP28 to endorse trade-based solutions for problems associated with climate change.
The initiative of the WTO Secretariat to observe Trade Day was not endorsed by the WTO membership. Many developing countries have been sharply critical of it.
This, in turn, could be used by the developed countries to argue for initiating negotiations on different facets of trade and environment at the WTO.
Developed nations’ agenda
What could constitute the negotiating agenda of the developed countries on trade and environment at the WTO? Obligations on trade and environment, as contained in some of the recent free trade agreements of the developed countries, provide useful pointers in this direction.
It is apprehended that these countries would seek to pursue the following two broad objectives at the WTO: first, provide a legal justification to the developed countries for taking environment-related measures, such as the European Union’s Carbon Border Adjustment Measure (CBAM), for restricting imports mainly from developing countries; and second, curtailing the policy space presently available to the developing countries to implement catch-up policies to nurture their domestic producers and service suppliers, particularly of environmental goods and services.
The second objective mentioned above could result in countries being required to forego imposing customs duties on imports of green products; prohibiting countries from imposing restrictions on imports of second-hand and remanufactured goods; harmonising technical regulations on certain products across countries on the basis of environmental performance parameters prevailing in the developed countries; prohibiting countries from giving preference to their domestic suppliers in government procurement of renewable energy generation equipment; and liberalising trade in environment-related services.
These obligations could hinder developing countries from supporting a vibrant domestic sector producing green products and environmental services, thereby making them overwhelmingly dependent on imports from the developed countries in their efforts at decarbonisation.
At the WTO, trade negotiators have recently commenced the task of preparing the draft of the MC13 outcome. In this exercise, the developed countries are likely to use the deliberations of the Trade Day at COP28 to push for a strong mandate for negotiating new rules on trade and environment at the WTO. How should India and other developing countries respond to this challenge?
India, Indonesia and South Africa have already articulated their strong reservations on the likely environment agenda at the WTO. While this is necessary, but certainly not enough. These countries need to do considerable leg-work to get more developing countries on their side.
Green tech transfer
In addition, they should also push for binding obligations for facilitating the transfer of green technologies to the developing countries. This would require some tweaking of WTO rules related to the protection of intellectual property rights.
The task confronting the developing countries on issues related to trade and environment at the WTO is definitely daunting.
In conclusion, decarbonisation in countries, both developed and developing, is set to unleash huge commercial opportunities. The trade and environment agenda of the developed countries at the WTO appears to be a pre-emptive move designed to corner most of the economic gains that would accrue from this transition. This has less to do with addressing climate change and is more driven by mercantilist motives.
As a study by Unctad reminds us, an environmental measure — the EU’s CBAM — will reduce global carbon emissions by not even one per cent; instead, it would erect high barriers for exports of many developing countries.
How the trade and environment agenda of the developed countries progresses, from the Trade Day at COP28 to the outcomes of the 13th WTO Ministerial Conference, is likely to determine whether the developing countries will secure even a thin slice of this commercial ‘green pie’ in the future.
If a large number of developing countries fail to join hands on trade and environment issues and are unable to speak in one voice at the WTO, they are likely to be saddled with an emission transition that would be unjust and deeply adverse to their long-term economic interests.
The writer is an expert on WTO and international trade. Views are personal