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TWN
Info Service on WTO and Trade Issues (Dec23/01) Geneva, 4 Dec (D. Ravi Kanth) — The World Trade Organization has issued two reports – “Steel Standards Principles” and “Trade Policy Tools for Climate Action”- “under its own responsibility” on the margins of the ongoing United Nations Climate Change Conference (COP28) in Dubai on 1 and 2 December, since “the principles (outlined in the reports) do not necessarily reflect the positions or opinions of Members or Member Governments of endorsing organizations or initiatives.” The two initiatives of the WTO Secretariat, including hosting two workshops at COP28, seem to be funded by the International Chamber of Commerce (ICC), said people familiar with the development. The funding by a private body to facilitate the WTO Secretariat in hosting two events at COP28 as well as the two initiatives developed by the Secretariat in close collaboration with the United Nations Conference on Trade and Development (UNCTAD), the Geneva-based International Trade Commission (which is funded by the WTO and UNCTAD) and ICC appear to have caused some consternation among several members, including the United States, Guatemala, Paraguay, Brazil, India, the European Union, the United Kingdom, Australia, Canada, and South Africa among others, in the run-up to COP28, said several participants familiar with the discussions. According to several people familiar with the discussions, at a meeting of the WTO’s Committee on Trade and Environment (CTE) on 16 November as well as at an earlier meeting of the Committee on Technical Barriers to Trade (TBT) on 9 November, the US and other countries seemingly questioned the alleged back-channel meetings held by the WTO with the private sector on these two issues without their governments knowing about it. STEEL STANDARDS REPORT In the Steel Standards Report, issued on 1 December and funded by the global steel giants, the participants drawn from the private sector recognized that “the iron and steel sector accounts for approximately 8% of annual global greenhouse gas (GHG) emissions, including methane, today and these emissions will need to be reduced by at least 90% for the sector to play a credible role in achieving a net zero energy system and wider economy whilst ensuring equity and a just transition, reflective of different countries’ circumstances.” They also recognized “the importance of world trade in steel, representing nearly 25% of global steel production for finished and semi-finished steel products in 2022, and that divergent, fragmented, and incompatible standards and methodologies for measuring GHG emissions can lead to trade and supply chain disruptions, market uncertainty and consumer confusion, increasing the costs of decarbonizing steel production.” According to the WTO Secretariat, the private steel giants recognized that “improvements in transparency, interoperability, and mutual recognition of methodologies for measuring GHG emissions, including methane, in iron and steel production and products can promote investment in, and adoption of, innovative near-zero emission technologies and near-zero steel products, and ease trade frictions.” Further, the steel companies recognized that “different methodologies may be needed at the project, production, and product levels, but that interoperability between them will drive faster decarbonization of the steel industry globally”, as well as, “the importance of independent verification of the resulting data from the use of such measurement methodologies.” In short, the steel companies recognized “the role of existing initiatives to drive decarbonization in the iron and steel sector and the need for greater alignment of the methodologies for comprehensively measuring greenhouse gas emissions that underpin these initiatives.” STEEL STANDARDS PRINCIPLES According to the Secretariat report, the steel sector representatives endorsed the following principles: * Collaborative and constructive dialogue is needed across developed and developing countries among governments, steel producers and their suppliers, industry associations, initiatives, policymakers, and civil society, to refine the existing emissions standards landscape for steel. Dialogue should follow inclusive, open, and transparent processes that ensure broad representation, market relevance, and sharing of good practices; * GHG (greenhouse gas) emissions measurement standards and methodologies, data collection and disclosure frameworks, at the project, production, and product-level, should be interoperable, enable mutual recognition, build on existing international standards, avoid duplication, and be coupled with increased data reporting to improve transparency and global tracking of emissions; * Emission measurement standards for steel products and production should drive the decarbonization of the global steel industry through performance-based measures that are technology agnostic; * Standards should be consistent with the WTO Technical Barriers to Trade (TBT) Agreement Code of Good Practice and the TBT Committee’s Six Principles for the Development of International Standards, Guides and Recommendations (transparency, openness, impartiality and consensus, effectiveness and relevance, coherence, and the development dimension); * Standards should be consistent with the IEA “Net Zero Principles” for emissions measurement and data collection in efforts to align and achieve interoperability between existing standards, methodologies, and frameworks, and those under development; * A common understanding of existing and emerging definitions for near-zero emissions steel production is needed; * And finally, the private sector representatives and the Secretariat will “endeavor to meet at least annually to review progress against these principles and encourage other organizations to adhere to these principles.” At the roundtable meeting on steel standards in Dubai, which was sparsely attended, the Director-General announced the WTO Secretariat’s support and went on to say that, “Fragmented and uncoordinated trade policies make it harder for the steel industry to decarbonize. They add uncertainty for producers, hamper cross-border movement of green technologies and inputs, and slow investments in clean technology.” The DG said, “Many people probably don’t realise that there is not just one way to make steel and different steels have different carbon footprints depending on the input metallics and the technology. A system that recognizes this is important, particularly when the transition to net zero will take many years.” According to the report, more than 35 key steel producers, industry associations, standard-setting bodies, international organizations and initiatives have endorsed the Steel Standards Principles. MENU OF OPTIONS At COP27 held in Sharm-el-Sheikh in Egypt last year, the WTO had pitched hard for integrating the trade component into the nationally determined contributions (NDCs) of the parties to the 2015 Paris Climate Change Agreement. However, the WTO Director-General Ms Ngozi Okonjo-Iweala’s efforts at COP27 met with little or no success. Against this backdrop, the WTO Secretariat has launched what it called “Trade Policy Tools for Climate Action” for meeting the global climate targets. “The United Nations’ authoritative “global stocktake” ahead of COP28 demonstrates that national pledges to cut global greenhouse gas emissions remain well short of what is required to avoid the worst effects of climate change in line with the 2015 Paris Agreement,” the DG said in her foreword to the report. In the report issued on 2 December, the WTO Secretariat “explores 10 trade policy tools that can accelerate progress towards climate goals. Each element could be integrated into nationally determined contributions (NDCs) and national adaptation plans (NAPs) as economies look to ratchet up the ambition of their climate strategies.” In a statement posted on the WTO website, the DG said: “The toolkit builds on the Secretariat’s research work to shed light on ways that trade and trade policy can help accelerate and amplify the impacts of climate action for the benefit of current and future generations.” “The lesson is clear: without globally integrated supply chains, getting to net-zero emissions by mid-century would become much more expensive,” the DG said. The toolkit, according to the Secretariat, could be a “source of information and possible inspiration to policymakers, spotlights 10 trade policy actions based on the Secretariat’s research and on what many WTO members are already doing.” The options include: (1) introducing trade facilitation measures to reduce greenhouse gas emissions associated with cumbersome border customs procedures; (2) deploying green government procurement policies; (3) using international standards to avoid fragmentation when upgrading energy efficiency regulations; (4) reviewing regulations and restrictions on providers of climate-related services to support climate mitigation and adaptation efforts; (5) re-balancing import tariffs to increase the uptake of low-carbon technologies; (6) reforming environmentally harmful subsidies to unlock additional resources for climate action; (7) facilitating and increasing trade finance to support the diffusion of climate-related technologies and equipment; (8) improving how food and agricultural markets function to support climate adaptation and mitigation by easing trade in food; (9) strengthening sanitary and phytosanitary systems to protect economies from the spread of disease, pests and other related risks heightened by climate change; and (10) improving the coordination of climate-related internal taxes, including carbon pricing and equivalent policies, to reduce policy fragmentation and compliance costs. On the issue of import tariffs, the publication notes that “crude oil and coal face average tariffs of 0.8% and 1.6% respectively while renewable energy equipment faces average tariffs of 3.2%, with some economies applying tariffs as high as 12%.” Therefore, it said “import tariffs could be reviewed to promote the affordability and uptake of green energy. At least 30 WTO members from all regions and levels of economic development, furthermore, have already used tariff reductions for environmental purposes, mostly for renewable technologies and low-carbon and electric vehicles.” Commenting on government procurement, which is a closed plurilateral agreement at the WTO wherein members outside the agreement do not come under its purview, the WTO publication says that “governments spend around US$13 trillion in public procurement per year, and this is directly and indirectly responsible for 15% of greenhouse gas emissions.” Consequently, introducing climate-sensitive criteria, while keeping public markets open for efficient and sustainable suppliers, could significantly reduce emissions, according to the publication. “The WTO’s Environmental Database reveals that members have notified the WTO over 70 environment-related government procurement measures since 2009.” MEMBERS OPPOSE SECRETARIAT’S INITIATIVES In the run-up to COP28, the DG and her deputy, Jean-Marie Paugam, apparently faced serious opposition as well as criticism for doing things with the private sector without governments knowing about such initiatives, said people familiar with the discussions. At a meeting of the WTO’s Committee on Trade and Environment on 16 November, the DG introduced the two initiatives. Ms Okonjo-Iweala seems to have told members that the two initiatives are being funded by the ICC. She suggested that the meeting be jointly convened by the WTO, UNCTAD, ITC, and ICC. Members were concerned over the DG’s announcement that the ICC is funding events of a member-driven organization, said several people, who preferred not to be quoted. At the CTE meeting held on 16 November, the US intervened first in apparently criticizing the move to hold the Secretariat’s meeting funded by the ICC, said people familiar with the discussions. In a similar vein, at an earlier TBT committee meeting on 9 November, a US official, Ms Jennifer Stradtmann, appears to have expressed dismay that the private sector in Washington had informed the US Trade Representative’s office, which had no clue about the steel standards initiative, said people familiar with the discussions. At both committee meetings, along with the US, other members including Guatemala, Paraguay, Brazil, India, the European Union, the United Kingdom, Australia, and South Africa apparently criticized the Secretariat for alleged breach of the WTO rules, said people, who asked not to be quoted. Paragraph 4 of Article VI of the Marrakesh Agreement clearly states: “The responsibilities of the Director- General and of the staff of the Secretariat shall be exclusively international in character. In the discharge of their duties, the Director-General and the staff of the Secretariat shall not seek or accept instructions from any government or any other authority external to the WTO. They shall refrain from any action which might adversely reflect on their position as international officials. The Members of the WTO shall respect the international character of the responsibilities of the Director-General and of the staff of the Secretariat and shall not seek to influence them in the discharge of their duties.” At the CTE meeting, the DG seemingly said that she intended to sensitize the COP about the role that trade can play in addressing climate change, said people familiar with the discussions, adding that none of her predecessors attempted to do this. She intervened twice at the CTE meeting to apparently assuage members’ concerns and opposition to taking up these issues without members’ consent in an inter-governmental and rules-based trade organization. +
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