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Understanding possible trade contributions toward a UN climate deal in Paris

by Jean Paul Thuillier, 
April 2015

This past February, UN climate negotiators met in Geneva as part of the Ad Hoc Working Group on the Durban Platform for Enhanced Action (ADP), the UNFCCC’s primary negotiating track moving towards Paris 2015. This is the first time the ADP met in Geneva, and it proved to be instrumental in moving forward on the main pillars of the climate negotiations.

Meeting in Geneva, where the World Trade Organization (WTO) has its headquarters, also provided the ADP an opportunity to explore ways in which trade could play a role in climate action.

Indeed, a group of WTO members are actively negotiating a deal to liberalise trade in select environmental products and technologies. At various occasions WTO Director General Roberto Azevêdo has publicly presented these Environmental Goods Agreement (EGA) negotiations as a “possible contribution” to COP 21 negotiations this December. In this respect, we are working together with ICTSD to increase awareness about the positive contribution EGA could provide to climate negotiations through joint events in Geneva, Brussels, and possibly Paris in the margin of COP21.

In this context, I organised a meeting between Roberto Azevêdo and Laurence Tubiana, the French Ambassador and Chief Climate Negotiator for the Geneva ADP negotiations.

The EGA-UNFCCC links and obstacles

In that meeting, Tubiana noted the similarities and connections between the climate negotiation instruments and the rules and practices of the WTO, especially in terms of bound tariffs versus applied tariffs. Present in both the climate and EGA negotiations is the notion of minimum level commitments, possibly complemented by voluntary “applied” measures.

Another theme of discussion concerned the policy space needed for the development of public policies. Tubiana noted that the present stage of climate discussions is focused on public instruments and policies, implying some relationship with the WTO rules. On that point, Azevêdo acknowledged that WTO rules provide enough policy space for developing the necessary tools to curb CO2 emissions, provided that the policies were not protectionism in disguise.

Azevêdo reminded us of the severe gap between developing and developed Members that still exists around the subject of the environment. He noted that while EGA constitutes a first step, many developing country Members still lack preparation and believe that a wide liberalisation would first benefit developed Members and could impede the development of nascent industries.

Level of participation

Stemming from the Davos Declaration, the EGA is based on the assumption that it will be “MFNised” (Most Favoured Nation) as soon as a critical mass is reached. Although only 17 members are participating in the plurilateral negotiations, we can consider that the critical mass is already almost there. With the US, China, the EU, Japan, Korea, Canada, and Australia alone, more than 85 percent of global CO2 emissions are accounted for in the agreement. Moreover, not far from 90 percent of the world trade is also currently represented.

Since a large number of developing country WTO Members have yet to participate and contribute to the EGA negotiations, they have been unable to insert their interests. However, developing country Members stand to benefit the most from tariff reduction negotiations because of their high tariff rates. There is a risk of “freezing” the extension of the membership as the Government Procurement Agreement shows, keeping the plurilateral agreement at the margins of the multilateral trade system rather than contributing to a new significant multilateral agreement.

We can argue quite easily that expanding membership complicates the goal of concluding the deal as soon as possible (i.e., at the WTO’s Tenth Ministerial Conference in Nairobi this December) and in support of the COP21. For one, the US’ procedural obligation to obtain congressional approval of new members is a 90 day process and could be a major hurdle to reaching an agreement by the end of the year.

Scope and political engagement

The notion of what constitutes an “environmental good,” which has led to a number of studies since the 1990s, is still in question in the EGA. In their lists of environmental goods up for negotiation, some Members have proposed the inclusion of biodiesel, nuclear energy, methanol, electric or hybrid cars, or textiles, placing into question the notion of environmental credibility. The issue of technological neutrality is a point of discussion that needs convergence and cross-fertilisation between trade and environment experts.

The inclusion of services and technologies is a further step to be decided, in line with the Davos Declaration calling for a “future-oriented agreement.” Non-trade barriers (NTBs), standards, and some services directly linked with the availability of green goods are indispensable components to the added value of an agreement. And determining the exact definition of “indispensable” or “enabling” services (i.e., services that may have an environment end-value not classified as “environmental” under CPC codes, and include for example business services related to engineering) is even more difficult than for goods.

The link with the Trade in Services Agreement (TiSA) negotiations and the services pillar of the Doha Development Agenda (DDA) needs to be considered as well. Pressure is high for a conclusion in Nairobi, which follows COP21 in December. Some kind of built-in agenda would then be necessary to agree upon so that services and technologies are inserted. But this view has not reached a consensus yet, as an important friend is reluctant to do so.

Negotiations are now approaching the end of the first phase, with the recent submission by China of its list of products for consideration and the compilation of all submissions to be prepared by the Chair by the 1st April. Then, “real” negotiations may begin in May on the possible contours of the EGA. The process shows that a successful outcome for the negotiation relies on efforts and input by all involved governments.

Overall, the EGA is a trade negotiation that took almost two decades to launch. A positive conclusion this December will not mark the end of the story. This parallels the climate negotiations in that COP 21 in Paris is seen as the starting point of an evolving binding agreement.

H.E. Mr. Jean Paul Thuillier is the Permanent Representative of France to the WTO. This contribution was presented in the personal capacity of the author and cannot be considered as representing the views of the French Authorities.

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