Global Trends by Martin Khor
Monday 6 July 2009
Unfair to tax South’s imports on climate grounds
are opposing a move by the
Can and should developed countries impose extra charges on the imports of developing countries based on the level of carbon dioxide and other Greenhouse gases that are linked to producing the imports?
This has become
a burning issue, especially since the
Part of that legislation
(known as the Waxman-Markey bill) obliges the
The importers will have to buy “allowances” for the emissions of the products they bring into the country. In effect, this is like putting an extra tax or duty on the developing countries’ imports, and the rate depends on how much carbon dioxide is emitted during the manufacture of these products.
The bill’s advocates
say this is needed so that the
The middle-income developing countries and those with large populations will be affected. Importers of their heavily-traded energy-intensive products will have to buy emissions allowances, a measure that will raise the prices of the imports, which could affect their sales.
The products to be subjected to this new import charge are expected to include chemicals, iron and steel, cement, glass, lime, some pulp and paper products, and non-ferrous metals such as aluminum and copper
The two biggest
developing countries –
Under the bill, the import measures will be automatically applied by 2020, unless the President declares that the measures are against the national economic interest, and Congress approves this declaration.
The use of trade measures with the effect of blocking out developing countries’ imports on climate grounds is about to generate great controversy and may result in a severe blow to the WTO and the multilateral trading system, as well as sour the atmosphere in the negotiations taking place in the UN’s climate convention.
countries will read the
Under the climate convention, only developed countries have to undertake legally binding commitments to cut emissions, in recognition that they are resposible for much of the emissions in the past.
Under the convention, the developed countries also committed to pay for the costs incurred by developing countries when they take actions on climate change. The convention also says that the extent to which the developing countries act against climate change depends on the extent to which developed countries provide them with finance and technology transfer.
The import measures
proposed in the
is brewing as to whether the proposed
Secondly, products that are like one another should be treated the same way. But the term “like product” is taken to mean an imported good that has the same physical characteristics as the local good. Both should be charged the same rate.
In considering import taxes or charges, it is the physical characteristics of the import that should be considered, and not the processes and production methods (PPMs) that are used in making the product.
Many argue that since the climate-related charges to be imposed are based on PPMs (that is, on how much emmissions were generated by the production), this is not compatible with the WTO rules or spirit.
However, others point out that there have been a number of panel cases in the WTO on the PPM issue, and that the decisions of the panles have not been conclusive as to whether an import measure based on PPMs is allowed by the WTO.
If the measure does
not clear thse two tests, its advocates can try a third method, which
is to rely on Article XX of the
Making use of this environmental exception to impose an extra tax on developing countries’ imports based on their pollution levels is unfair to developing countries, because their levels of development, access to financial resources and technology are much lower than those of developed countries.
As the veteran journalist C. Raghavan remarked some years ago, it is an imbalance and unfair to developing countries to have an environment exception to the rules (this favours the developed countries) while the WTO does not have an exception to the rules on developmental grounds (which would favour developing countries).
In any case, this
issue can be expected to be brought up at both the WTO and the climate
convention, as the developing countries are suspicious that the trade
measures proposed in the