WTO: Ensuring that sustainable development and trade are equitable

A key concern with the linkage of the environment in a trade agreement is the risk of it becoming a proxy for a protectionist measure

Close on the heels of the Glasgow Accord on climate, “trade and sustainable development” will be discussed at the forthcoming ministerial of the World Trade Organization (WTO) from November 30 to December 3.

Both “sustainable development” and “environment” find a place in the first paragraph of the agreement establishing the WTO, in a nuanced text which reveals the delicate dynamics of the issue (AFP)

A group of 57 countries — including the United States, the European Union, Japan, and China — has released a draft roadmap calling for identifying concrete actions for “environmentally sustainable trade”. Titled Trade and Environmental Sustainability Structured Discussions (TESSD), it proposes discussions on liberalisation of trade in environmental goods and services, and trade-related climate measures.

Both “sustainable development” and “environment” find a place in the first paragraph of the agreement establishing the WTO, in a nuanced text which reveals the delicate dynamics of the issue. With specific reference to the environmental pillar, WTO emphasises that the preservation of the environment goes hand in hand with the enhancement of the means for doing so, given the varying needs of countries at different levels of economic development. This resonates with the principle of the United Nations Framework Convention on Climate Change of “common but differentiated responsibilities and respective capabilities” (CBDR-RC), which is a recognition of the differentiated accountability of countries for the climate crisis.

A key concern with the linkage of the environment in a trade agreement is the risk of it becoming a proxy for a protectionist measure. To address this, WTO agreements mandate that environmental measures should not be applied in a manner which results in discrimination between countries, or a disguised restriction on trade. A dedicated Committee on Trade and Environment (CTE) under the WTO was mandated to ensure avoidance of protectionist trade measures. Detailed discussions on trade and environment have been held at the CTE since the Doha Round of 2001. A key area was liberalisation of trade in environmental goods and services (EGS), which TESSD proposal also deals with.

It is worth recollecting the lessons of the EGS discussions where, despite several years of negotiations, an agreement was not possible since the list of goods included those with multiple non-environmental uses. India had then proposed an approach that would assess eligibility for liberalised market access based on the intended environmental use of the goods and services. India has also argued for transfer of Environmentally Sound Technology (EST) to developing countries, including access to IPR and financial resources.

The proposed TESSD does not acknowledge the wealth of experience gained in previous CTE discussions. Instead, it seems to seek a rewrite with only some WTO members. The underlying problem with this is that it poses a threat to the WTO’s multilateral mandate.

“Sustainable development”, to be truly meaningful, cannot be the domain of a few members seeking quick market access.

TESSD also highlights the need to discuss “trade related climate measures and policies”. The EU has proposed a carbon border adjustment mechanism (CBAM), and the US is considering a carbon tax on imported products. The concern appears to be the competitiveness of domestically manufactured products which need to adhere to stringent environmental standards, which imported products may not necessarily have been subject to. Such unilateral measures are unlikely to be WTO-consistent.

UNFCCC’s tightly negotiated arrangements do not prescribe a “one-size-fits-all” approach to emission reductions. A CBAM that seeks to impose the same level of emission reduction obligations on exporting countries, irrespective of compliance with the UNFCCC mandate, is, therefore, iniquitous and unfair. Any discussion on “sustainable development” would necessarily need to address these aspects.

Human innovation has ensured that clean technologies exist for achieving sustainable development. The challenge for WTO members at the ministerial is not to be derailed by a myopic approach, and instead ensure open, honest discussions on how sustainable development can be achieved for all.

R V Anuradha is a partner, Clarus Law Associates, New Delhi, specialising in trade law and policy

The views expressed are personal