TWN Info Service on Climate Change (Sept08/01)
30 September 2008
Third World Network

Climate: Coercion on developing countries will mess climate talks, says Lamy
Published in SUNS #6555 dated 25 September 2008

Geneva, 24 Sep (Martin Khor) -- Attempts to coerce developing countries to take on commitments on climate change will not work and they will instead dangerously create a reaction that will make the climate change negotiations more complex.

This was stated by the WTO Director-General Pascal Lamy at the first plenary session of the WTO's Public Forum 2008 that started today.

"My frank belief is that developing countries, especially big emerging countries, will not step into climate change commitments which are necessary for a solution but which are politically difficult for them, without more trust that the rules of the game are balanced to bring them comfort," said Lamy.

Coercion such as in the approach that "If they don't understand, we will force them to understand" will not work, said Lamy. "More dangerously, this will create a pushback that makes the negotiations more complex.

"In politics, blaming the foreigner is easy to do, but it will make an outcome on climate change negotiations more difficult."

Lamy was speaking in a panel on "Mutual supportiveness of trade, climate change and development objectives and policies", which kicked off the three-day public forum, an annual event that is being attended by several hundred NGOs, academics and diplomats.

Others on the panel (chaired by Fiona Harvey of the Financial Times) were Indonesian Trade Minister Dr Mari Pangestu, key climate negotiator for Denmark Thomas Becker and New Zealand's climate Ambassador Adrian Macey.

Lamy said climate is a very serious issue in the WTO because the Marrakesh agreement that set up the WTO says that trade opening must serve sustainable development. He spoke on three aspects in the relation between trade, climate and development -- trade, trade measures and geopolitics.

On trade, Lamy said there is an issue whether trade is good or bad for climate change, which is a small issue compared to the domestic issue. On the carbon footprint in transport (for traded goods), he said shipping is a low emitter compared to other transport modes, and the solution is through energy pricing (if it is right, then the cost of transport is internalised).

On "food miles", this would first appear as bad as products have to travel far before consumption but at second look it can be good if less carbon is emitted when producing goods in other countries. He concluded that domestic issues on energy, consumption patterns, etc are more important in considering climate change than trade.

On trade measures that will increase or decrease trade flows, Lamy said there is a debate on this but it is also not the main issue. Liberalisation of climate friendly products can help tackle climate change.

On the issue of new border measures relating to climate, Lamy gave the examples of carbon taxes on energy intensive goods or a scheme requiring importers of energy intensive goods to buy carbon permits to offset pollution or to deal with competitiveness of domestic goods.

Saying that he won't take a position on the legal aspect (whether the measures are WTO compatible), Lamy said the question cannot be answered in general terms and lawyers will correctly say "it depends."

Commenting on the desirability (rather then legality) of these measures, Lamy said it depends whether they are part of an overall agreement in the UNFCCC (UN Framework Convention on Climate Change) or whether the measure is a unilateral action.

"It is in the environment arena and not the trade arena whether a climate change solution is found," he said. "If the solution is not found in the climate arena, we won't find it in the trade arena. The trade system will adjust in light of any international consensus or convention in the UNFCCC."

To back this up, Lamy referred to the relation of the WTO with previous MEAs (multilateral environment agreements) with a trade limiting component, such as those on chemical substances and endangered species. There has been no problem with interaction. There will be no problem for the WTO adjusting to a post-Kyoto climate MEA, he said.

Lamy added that the sequencing of actions is important. Actions tackling climate change have to start and be done at home. There is also a need for an international convention, and if there is a trade problem at the end of the day, we will look at it, he said.

On the trade-climate connection from a geopolitical angle, Lamy said the biggest problem in the climate negotiations is fairness and equity, for example, between countries with one ton and 20-25 tons of carbon emission per capita. Which countries should curb their emissions is an equity issue. Coercion of developing countries will not work but will create a negative "pushback."

Lamy also spoke on an intersection between the WTO's Doha talks and the climate talks. If there is no solution to the Doha talks, this will lessen the political momentum for the climate talks.

Indonesian Minister Mari Pangestu, reporting on the Trade Ministers' meeting on the sidelines of the Bali climate talks last December, said the question was how to best handle climate change without affecting development, and how to let trade lead to development without taking away from the environmental objective.

She said developing countries were concerned that developed countries would make use of trade instruments, especially in the absence of a multilateral climate agreement. Countries that are afraid of losing competitiveness or that want to force action on other countries regarding energy efficiency or that are worried about the migration of industry to countries with lower standards are preparing to take border measures like a carbon tax.

"Developing countries face the risk of such instruments to block their trade, as disguised protectionism," she said. "We are already facing these trade barriers, for example, small furniture exporters are facing eco-labelling and traceability standards, and we don't have the capacity to meet these standards."

On the way ahead, she said a multilateral outcome on targets and pricing of carbon s needed, while steps should also be taken to understand better the trade-environment relation. "We need to focus on the carrot and not the stick to encourage developing countries to move on climate issues," she said.

The WTO needs to engage with the UNFCCC to minimize potential conflicts on trade and climate change. Sequencing is also key - consensus at the UNFCCC is important to prevent the use of trade instruments.

Danish climate negotiator Thomas Becker spoke on the five building blocks in the climate negotiations (shared vision, mitigation, adaptation, finance and technology). He stressed that even if developed countries stop all their emissions, sustainable development cannot be achieved (implying action by developing countries is also essential).

He also stressed the need to rely on and expand the carbon market and the importance of the pricing of carbon, as the carbon market in developing countries require a baseline.

Commenting on the differentiation issue, he said, "So far, the developing countries insist that they are one group and they are the same. If I were them, I would do the same for tactical reasons. But it is hard to compare OPEC countries with some African countries." He said it does not make sense as their capability is not the same, and this issue has to be "gently discussed".

Adrian Macey of New Zealand agreed that it was necessary to look at developing and developed countries as a continuum of countries (and not just two groups). What a global goal should be has to be based on trust.

He recognized finance as a key area and said the Chinese proposal (at the UNFCCC) that developed countries contribute 0.5 to 1 per cent of GNP is an indication of the scale we are looking at, and what this package is to deliver should be discussed.

Responding to a question on breaking the barriers to technology transfer, Pangestu said there is a polarized debate on this. Developing countries say that they cannot afford the technology needed. On the IPR issue, these technologies are owned by companies which invested in the R&D, and the question is how they can get returns but also how can developing countries pay for the technology.

She added that one solution is to learn from the TRIPS and medicines discussion, how to have generic medicines that are not subject to royalty payment. "Can we do something like that for clean technologies? In Bali, we debated on this and there was no conclusion."

Another solution was to have a global fund which pays for the innovation cost and allows developing countries to get the access, she said.

The panel Chair, Fiona Harvey, commented that on the trust issue, there was also a mistrust of developed countries on developing countries. They are worried that if they agree to targets and the developing counties do not, the big heavy industries of developed countries will migrate to China, India, etc. The developed countries fear being put in a competitive disadvantage situation.

Becker responded that this was very important as one should not underestimate the anxiety of some developed countries, companies and unions that their jobs and industries would be exported. But he would also like to "turn this around." If developed countries are to earn the respect of developing countries, they have to take the first step.

He had advised his politicians to recognize that much of the damage (in climate change) is done by the developed countries and they have historical responsibility. "You can't argue that we supplied the world with goods. The first step must come from developed countries without condition or without too many conditions. If this happens then developing countries will look at developed countries with other glasses."

On the trust issue, Lamy responded that it is a central political issue, and is partly a matter of perception. There is a perception problem on both sides.

"Many developing countries are not convinced the developed countries are playing fair, especially with border measures, which they fear is part of a hidden agenda to replace old obstacles to trade with new sophisticated obstacles to trade. The solution is that the developed countries must show they are serious when they say that trade opening works for developing countries."

Lamy added that in the developed countries' perception, the emerging countries now have to pay their share. They doubt that the developing countries are ready to do that, and believe that the latter want to do "free riding" at as low an economic cost as possible.

If the perception problem is not addressed at the WTO for the next 10 years, it would be a very, very bad sign. Building trust in trade is a low hanging fruit that is a sign to the climate talks which is a higher hanging fruit, said Lamy.

From the floor, a representative from Public Services International said climate change is the result of market failure. Yet the speakers were talking on relying on the market to deal with the climate crisis. Poor countries need the public sector to do the action but its revenue had been cut by IMF and World Bank policies and by lower trade revenues due to liberalization.

He said a climate solution requires strengthening the role of the public sector and its financial resources. R&D should not be left to the transnational companies, instead, the public sector should do the funding. +