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Info Service on UN Sustainable Development (Feb23/02) Geneva, 2 Feb (D. Ravi Kanth) — The Trade and Development Report (TDR) 2022 of the United Nations Conference on Trade and Development (UNCTAD) has offered a “positive” trade and environment agenda for addressing the “missing developmental dimension”, as a counter to the ongoing discussions on controversial plurilateral initiatives at the World Trade Organization. Amidst the escalating war between the United States and the European Union over the provision of green subsidies, the TDR’s “positive” trade and environment agenda provides a global framework to address climate change, said negotiators from developing countries. Last year, the US launched two subsidy initiatives – the CHIPS Act of 2022 and the Inflation Reduction Act of 2022 – in a move directed largely against China. Of the two initiatives, the US Inflation Reduction Act (IRA) intends to provide $369 billion for a range of green subsidies with the avowed goal of turning the US into a global hub for climate-related industries. It also aims to lure foreign companies that are producing low-carbon-content products into the US. The US initiative in providing green subsidies appears to have caused a panic for the European Union, Washington’s trans-Atlantic trade partner. The EU is apparently worried that the IRA will severely undermine the EU, according to media reports. According to a news story in the Financial Times on 1 February, the heads of state of the EU member countries are hosting a summit on 9-10 February that appears to be aimed at “figuring out how to respond to the massive subsidies and “Buy American” provisions rolled out under the $369 billion IRA.” “Europe is in the panic mode,” the paper said, quoting a comment made by a Dutch member of the European Parliament. Instead of seeking a global solution for an existential global problem like climate change, Washington’s “US-First” strategy through its IRA poses serious challenges to the developing and least-developed countries. Not only are the developing countries likely to be subjected to new carbon-border tax arrangements by the EU and also similar border duties to be adopted by the US, they would also not be able to withstand the impact of the hundreds of billions of dollars in green subsidies that are being provided by the US. Consequently, the developing and least-developed countries could be forced to pay huge royalty fees for the new green technologies being developed by the US and even the EU in the coming years. UNCTAD’S TDR It is against this backdrop that UNCTAD’s TDR 2022, issued three months ago, assumes great importance. In section D of Chapter V (page 134) of the TDR, a comprehensive survey of ongoing discussions on trade and climate change at the World Trade Organization is provided. Despite the collapse of the plurilateral environmental goods agreement in end-2016, major developed countries have been spearheading several trade and environment initiatives over the last two years at the WTO. The EU along with several developed and some developing countries, for example, initiated the Trade and Environmental Sustainability Structured Discussions (TESSD). The TESSD is aimed at “trade-related climate measures and policies” that can contribute to climate and environmental goals and commitments “while being consistent with WTO rules and principles.” On the face of it, the TESSD’s objective appears to have been hollowed out because of the wave of green subsidies being provided exclusively by the US to turn its industries into green industries. In addition to the initiatives at the WTO, major developed and several developing countries are also pursuing bilateral and regional initiatives. According to the TDR 2022, “developed countries have tabled unilateral trade-environmental proposals, such as the European Union-United States Green Steel Deal,” while the EU is set to embark on its carbon border adjustment measure. Significantly, according to UNCTAD’s estimates, “the EU’s proposal of a carbon border adjustment measure (CBAM) will reduce global carbon emissions by not more than 0.1 percent while decreasing global real income by $3.4 billion, with developed countries’ incomes rising by $2.5 billion and developing countries’ incomes falling by $5.9 billion.” The TDR says, “the tariffs imposed will have adverse implications for the foreign exchange earnings of developing countries while having little impact on global (carbon) emissions.” It observes that “these concerns about a missing developmental dimension in trade commitments combine with mounting evidence that industrialized countries are outsourcing pollution at the same time as they avail themselves of industrial policy tools to bolster their dominance within emerging green industries.” According to the TDR, the limited progress in reducing global trade-embodied CO2 emissions leaves the per capita emissions of poorer and richer regions still having a ratio of 10 to 1. “While final demand emissions amounted to 1.6 tonnes CO2 emissions per person in smaller developing countries in 2018, with 0.36 tonnes imported, they represented 15.4 tonnes in Oceania, 13.6 tonnes in North America, and 8.1 tonnes in Europe, with extra-continental imports amounting to 4.8 tonnes, 2.4 tonnes and 1.6 tonnes in those regions, respectively.” Although “trade liberalization creates larger markets and opens possibilities for economies of scale,” it also strengthens global material extraction, production, consumption, and waste. The TDR argues that “in conventional accounting, this (process) improves consumer welfare, but offsetting trends include growing employment vulnerability and inequality induced by trade, particularly in the Global North, and growing material extraction and pollution offshoring affecting populations in the Global South.” In short, according to the TDR, “rather than building a trade and environmental agenda on trade liberalization related to commitments in trade agreements, making the most of the coherence between special and differential treatment and the United Nations Framework Convention on Climate Change (UNFCCC) principle of common but differentiated responsibilities may offer a better point of departure for a development-oriented approach in the trade and climate nexus.” The TDR offers a blueprint for a “positive Trade and Environment Agenda”. It said that the Agenda must focus on the following objectives:
According to the TDR, the above “multi-dimensional approach could translate into deeper economic cooperation and planning at the regional level on a series of climate-critical sectors, such as energy, waste, food and infrastructure.” More importantly, it said that “by pooling resources, capacities and expertise, regionally devised development plans could build-in resource efficiency from the beginning.” In conclusion, it said the central aim of the UN and WTO members ought to be to “tackle ecologically unequal exchange, retaining materials, labor and land to promote developmental ambitions.” The above multi-dimensional approach would require developed countries to regulate and mitigate their CO2 emissions within their jurisdictions as well as tackle their dependence on over-consumption, it added. +
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