WTO Rules & Climate Change: The Urgent Need to Negotiated Clarification

Abstract

This paper argues that there is an urgent need for the World Trade Organization (WTO) to facilitate a negotiation process to achieve resolution to the current conflict between trade rules and climate change. This urgency comes from the present lack of clarity of how Members can fully honour international trade obligations, whilst also implementing domestic climate change mitigation measures. Both obligations have been accepted to be of equal importance. Free trade obligations necessarily have an effect on climate change mitigation. For one, trade rules restrict countries from being able to discriminate between products based on the regulation in the country of origin. This provides producers with the opportunity to dodge emissions obligations by moving production to jurisdictions with no climate regulation, thus reducing the overall effectiveness of greenhouse gas emissions reduction efforts. Countries should be able to implement measures to target this carbon leakage. Additionally, the absence of climate regulation in some jurisdictions leads to an imbalance in the ability of sectors to compete on even economic ground. It is vital that trade rules do not continue to act as potential barriers to implementing effective climate change mitigation measures. This lack of clarity is demonstrated using examples of common mitigation policies of subsidies, emissions trading, and carbon related border tax adjustments. Instead of allowing the continuation of this inadequate disharmony, the WTO should seek to enable a mutual supportiveness between the objectives of free trade and emissions reduction. This is not a matter that can take a back step. It requires urgent action. The world is facing more extreme effects of climate change as time goes on: the full capacities of mitigating measures are vital for the protection of the atmosphere. The WTO Dispute Resolution Body (DSB) is now faced with a number of clashes which involve the trade-climate synergy. This problem should not be left to the stretched interpretation of Agreements that were drafted before climate change was an issue. Countries are seeking to move forward into resolution. The WTO has acknowledged that there is a lack of clarity between trade and climate obligations. It has also acknowledged that this is a problem that must now be addressed. A negotiation avenue should facilitate this clarity: the DSB should not be left alone to rule on this important global issue. Such clarification could be addressed through a dedicated trade-climate agreement; a reworking of existing trade rules; a peace clause; and/or a dedicated trade-climate committee. Now is the time for the WTO to embrace this problem, and facilitate the available solutions to this global problem.