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Info Service on WTO and Trade Issues (Mar23/01) Geneva, 15 Mar (D. Ravi Kanth) — In three separate proposals on trade and environment with differing emphases, China, Colombia, and India dealt with the various challenges in addressing the trade dimension of climate change, with India insisting that the WTO is not the forum for addressing trade-related climate change issues, say people familiar with the proposals. In the face of serious attempts by the European Union to bring in trade-related climate change issues through its plurilateral Trade and Environmental Sustainability Structured Discussions (TESSD) initiative, including the controversial EU’s carbon-border adjustment mechanism, the three proposals in their own ways raise serious concerns. The three proposals, reviewed by the SUNS, will come up for discussions at the World Trade Organization’s Committee on Trade and Environment (CTE) on 14 March, and are expected to continue into 15 March as well. INDIA’S PROPOSAL India was the first to fire the proverbial opening salvo against the increasing use of unilateral measures under the garb of environmental measures to address climate change at the World Trade Organization, including the European Union’s controversial carbon-border-adjustment measures, say people familiar with the development. The unilateral measures such as the EU’s carbon border adjustment mechanism (CBAM) apparently violate the WTO’s core rules and covered agreements, India has argued. More disturbingly, it said such measures pose “systemic implications for international law as a whole, since any unilateral action undermines multilaterally negotiated rights and obligations of countries.” In a restricted Job document (Job/TE/78), titled “Concerns On Emerging Trends of Using Environmental Measures as Protectionist Non-Tariff Measures” and circulated on 10 February, India has covered the entire gamut of unilateral measures and offered a blueprint for the WTO to pursue against climate change. In the document, India says somewhat emphatically that “the WTO cannot and should not undermine or render ineffective the specialized rules of multilateral environmental agreements.” According to India, “the WTO should remain an international organization, which promotes effective collective action rather than unilateral measures.” As reported in SUNS #9684 dated 8 November 2022, the WTO’s Director-General, Ms Ngozi Okonjo-Iweala, tried hard to include the issue of trade in the Nationally Determined Contributions (NDCs) of the parties to the Paris Climate Change Agreement through a “trade and investment facilitation pathway” at the 27th Conference of Parties (COP27) to the United Nations Framework Convention on Climate Change (UNFCCC) in Sharm El-Sheikh, Egypt. She sought to justify the inclusion of trade in the NDCs as “part of the solution for achieving a low-carbon, resilient, and just transition.” However, due to intense opposition from several developing countries, Ms Okonjo-Iweala failed to include her proposal in the COP27 outcome document. IMPORTANCE OF ADDRESSING GHGs It is against this backdrop that India’s four-page proposal assumes great importance. It says that “reducing greenhouse gas emissions to address climate change, is a global effort”, as per the Paris Climate Change accord of 2015. India argues that “most WTO members are represented at the United Nations Framework Convention on Climate Change (UNFCCC) and participate in its negotiated outcomes.” The foundational principles of the Paris Agreement are based on “the principles of equity and common but differentiated responsibilities and respective capabilities (CBDR-RC), in the light of different national circumstances, and nationally determined contributions (NDCs) made by the parties to the UNFCCC.” More importantly, the foundational principles recognize that “the largest share of historical and current global emissions of greenhouse gases originated in developed countries, that per capita emissions in developing countries are still relatively low and that the share of global emissions originating in developing countries will grow to meet their social and development needs,” said India. According to India, “it is also important to underscore that the principles of “respective capabilities” recognize the different socioeconomic status of countries”, as stated in the preamble to the Marrakesh Agreement establishing the WTO. The preamble to the Marrakesh Agreement “recognizes this concept (respective capabilities) when it notes that the expansion of trade in goods and services in accordance with the objective of sustainable development would require protection and preservation of the environment and the means of doing so, in a manner consistent with the respective needs and concerns of countries at different levels of economic development.” The Paris Agreement provides for different NDCs to “effectively reflect different climate policy choices across countries”, which may be based on different national circumstances. “The policy choices include a variety of instruments like regulatory measures for conservation, afforestation, emission reductions, transition to non-fossil fuel-based energy sources, standards, taxation, carbon pricing, and carbon trading,” India has argued, suggesting that the “Regulatory heterogeneity is inherent in the concept of NDCs under the Paris Agreement of the UNFCCC.” DANGERS POSED BY CBAMs Against this multilateral framework contained in the Paris Agreement, India says that “carbon border [adjustment] measures (CBAMs) that are being considered (by the European Union and the United States) for imposition on imported products, effectively amount to prioritizing a singular policy of the importing country over those of exporting countries and will amount to imposing a unilateral vision of how to combat climate change.” India said such unilateral policies go against “a country which may be fully compliant with its NDCs under the UNFCCC, has to either match the importing country’s emission reduction obligations or pay a cost/price for (the) trade.” India said these measures tend to “upend the value of any multilaterally negotiated outcomes under Multilateral Environment Agreements (MEAs) such as the UNFCCC.” “Not only will such measures undermine the multilaterally agreed mandate of NDCs of the country of export, but also create (a) distinct preferential treatment for domestic over imported goods,” India has pointed out. It is important to consider “the motivation for such measures, since these seem to be primarily aimed at leveling (the) field for domestic producers of countries that, as a result of their climate change commitments under the UNFCCC, have to undertake higher emission reduction norms,” India added. In short, it suggests that “the measure is a protectionist one and not one that can achieve any greening of the economy.” Citing a report from the United Nations Conference on Trade and Development (UNCTAD), India said “a carbon border measure will have limited effect on mitigating climate change and enhance trade costs for developing countries.” As reported in SUNS #9737 dated 3 February 2023, UNCTAD has offered a “positive” trade and environment agenda for addressing “the missing developmental dimension” in the ongoing discussions on controversial plurilateral initiatives at the WTO. According to the Indian proposal, much of the carbon border measures seem to be targeted and applied to “trade-exposed industries” such as steel, aluminum, chemicals, plastics, polymers, chemicals, and fertilizers. It seems to reflect “the underlying competitiveness concerns driving such measures.” It places an obligation on importers and exporters to comply with mechanisms of verification of whether or not deforestation occurred in the country of origin, enhancing compliance burdens. Worse still, India said “both carbon border measures, and the evolving laws on deforestation, reflect the growing trends towards rule-making that has an extra-territorial reach. Such measures will only burden trade partners, especially the developing countries, with impractical, cumbersome and costly compliance obligations.” MRL MEASURES Another concern, according to India, “is with regard to measures that prescribe Maximum Residue Limits (MRL) for certain products, on the reasoning that this is for an environmental objective.” While acknowledging that “environmental objectives are legitimate policy choices for each government to consider,” India said that “to the extent that such measures are being imposed without contextual risk assessment and without factoring in the differences in climatic and soil conditions around the world, they would need careful deliberation to ensure reasonable nexus with the objective sought to be achieved.” India said that “another area of concern is the emerging arrangements of “green Tariff Rate Quotas”, expressing “concern on these arrangements that seek to develop a methodology to assess the carbon content of traded commodities and provide specific tariff-free quotas to select Members.” Such arrangements, according to India, “would only result in (the) exclusion of other Members from the trading arrangements.” While trade that can facilitate true growth and development can only be achieved through fair access to and transfer of green technologies with “financial assistance,” India argued that “shared global concerns need global solutions, and small clubs cannot achieve this.” WTO’S CTE MUST CONSIDER KEY ISSUES In the context of climate change, India said the key issues that the WTO’s Committee on Trade and Environment can address are those which emanate from the WTO agreements. They include:
Also, other relevant bodies such as the TBT (Technical Barriers to Trade) and SPS (Sanitary and Phytosanitary Measures) Committees also have a key role to play in addressing concerns related to measures on MRLs (Maximum Residue Limits). The more fundamental issue, said India, is that these measures are effectively nullifying the tightly negotiated balance of rights and obligations under the MEAs (Multilateral Environment Agreements), or the principle of special and differential treatment to developing countries under the WTO agreement have not been addressed.” India said the Outcome Document of the recent WTO’s 12th Ministerial Conference (WT/MIN(22)/24) has “recognized global environmental challenges including climate change, and the importance of the contribution of the multilateral trading system to promote the UN 2030 Agenda and its Sustainable Development Goals in each of its dimensions, i.e., economic, social, and environmental, “in so far as they relate to WTO mandates and in a manner consistent with the respective needs and concerns of Members at different levels of economic development”.” In conclusion, India argued somewhat emphatically that “the WTO cannot and should not undermine or render ineffective, the specialized rules of multilateral environmental agreements.” Also, “the WTO should remain an international organization, which promotes effective collective action rather than unilateral measures.” Therefore, the issues of environment and climate change are best handled under specialized MEAs (multilateral environment agreements), which work on the principle of collective global action to resolve a global problem, India argued. Lastly, India urged “WTO Members to ensure that any environment and climate-related trade measures take into account common but differentiated responsibilities and respective capabilities of all Members,” arguing that “any proposed environment and climate-related trade measures should respect the social and economic development needs of WTO Members.” It said these environmental proposals “should not constitute arbitrary or disguised restrictions or unjustifiable discrimination in international trade.” COLOMBIA’S PROPOSAL In another significant proposal, Colombia, the South American country with a rich biomass, underscored the need for a debate that effectively addresses the urgent challenges we face while recognizing the variety of interests of developing Members and supporting sustainable development. The proposal, which was circulated as a restricted room document (RD/CTE/221*) on 9 March, says that “WTO Members, gathered in the CTE, should agree on an understanding of the principles and parameters that guide our work as experts in the environmental and trade spheres simultaneously.” It says that “this understanding should be the basis that supports our future deliberations on specific policies and measures.” Colombia suggested “a multiple set of principles and parameters recognized by international environmental law and international trade law,” suggesting that several of such measures “have binding force as express normative provisions, and others already form part of customary international law in each of the spheres.” It lists several key principles and parameters of international environmental and trade law that should frame future discussions in the Committee on Trade and Environment. The principles proposed by Colombia include:
Colombia also called for reflecting the above principles in the design of measures related to trade and the environment, and emphasized the need for “establishing a concrete and realistic action plan after the discussions in the CTE, which includes clear objectives and practical measures to advance the implementation of the agreed principles.” The thrust of Colombia’s proposal is on Common but Differentiated Responsibilities and Respective Capacities (CBDR-RC) and non-discrimination to promote effective, transparent, and coherent sustainable trade with environmental goals. CHINA’S PROPOSAL A day before the CTE meeting, China circulated its proposal on 13 March calling for “dedicated multilateral discussions on the trade aspects and implications of certain environment measures” which have wide ramifications and cause significant impact on trade, in what appears to be a move at targeting the EU’s alleged protectionist measures such as the carbon-border-adjustment-mechanism (CBAM) or the proposed carbon tariffs by the United States. China’s proposal, titled “a proposal for dedicated multilateral discussions on the trade aspects and implications of certain environmental measures,” highlights how trade policies are being turned and twisted to implement certain environmental objectives. Though China did not mention the specific measures that are being implemented under the pretext of trade measures, it says that trade policies “should be consistent with the fundamental principles and basic rules of the WTO, strike a balance between environmental considerations and trade considerations, and do not constitute protectionist measures or green trade barriers.” It cites paragraph 14 of the MC12 outcome document which notes “the importance of the contribution of the multilateral trading system to promote the UN 2030 Agenda and its Sustainable Development Goals in its economic, social, and environmental dimensions” and “the role of the Committee on Trade and Environment as a standing forum dedicated to dialogue among Members on the relationship between trade measures and environmental measures”. China says that “focus should be given to the trade aspects of environmental measures which have wide ramifications, are of high interest and concerns to members and may have a significant impact on trade. There are many examples, such as those raised regularly at the meetings of the Council on Trade in Goods, the Committee on Market Access, the TBT Committee and the CTE.” China has also proposed the modalities and elements of the proposed discussions, such as that the member “implementing the measure may submit a written report regarding policy objectives and ways of implementation and make a presentation,” while “members affected by the measure could submit written comments and suggestions”. The modalities/elements proposed by China include: A. The domestic legal basis and international legal basis of the relevant measures; B. The means of implementation of the relevant measures, including the major steps of administrative procedures, applicable standards and certification requirements, information reporting requirements, and compliance requirements; C. The nexus between the relevant measures and the intended environmental objectives; D. The potential impact of the relevant measures on international trade; E. The consistency of the relevant measures with the WTO rules; F. The inclusiveness of the relevant measures, including how to take into account different regulatory approaches of different members and how to reduce the adverse impact on trade of developing members. It remains to be seen how the EU and its close allies in the TESSD will respond to the above proposals which seem to undermine the plurilateral thrust of the EU, the US, and other major developed countries. +
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