On 28 January 2022 the Director General of the World Trade Organisation (WTO) gave a keynote speech at a conference on more responsible and sustainable trade, held in France which currently has the presidency of the European Union. The speech looked at the potential role of the WTO in addressing various crises facing the world.
Food production
The Director General noted that a set of models published in the magazine Nature Climate Change eighteen months ago estimated that climate change would push 55 million people into undernourishment by the year 2050, owing to the impact on local food production. However, greater trade integration encouraged by tariff cuts and trade facilitation could reduce the impact by up to 64%, or 35 million people.
Environmental issues
The cost of renewable energy could be reduced if trade barriers to environmental goods and services are lowered. This would also reduce the capital costs of building climate-resilient infrastructure. Currently, tariffs on renewable energy goods are often between 10% and 14%, and the non-tariff barriers on clean goods are frequently stronger than barriers for dirty goods. A plan launched by a group of WTO members in 2016 would have liberalized trade in around 250 to 300 environmental goods, but this was never implemented owing to concerns that the benefits would accrue disproportionately towards certain countries. WTO member countries could consider launching another similar plan, starting with a small list of products and services and expanding the list over time.
It has been estimated that annual clean energy investments would need to triple to USD 4 trillion by 2030 to meet Paris Agreement climate targets. This can be helped by an open and competitive trading environment. As governments look at the introduction of incentives for green investment in their domestic law, they should cooperate to ensure that international competition is healthy and fair. Subsidies for fossil fuel production and consumption globally amount to around USD 500 billion and reform to these subsidies would reduce emissions while freeing funds for other purposes.
Carbon pricing
Currently there are nearly 70 different carbon pricing schemes in force in various countries and regions, covering different sectors and with large differences in prices. This situation increases compliance costs and gives rise to uncertainty for the private sector, especially for small businesses. Some countries or trading blocs such as the EU are considering border tax adjustment measures, to equalize carbon costs in relation to foreign and domestic producers.
Many developing countries see a danger of protectionism in these developments. The EU is working to make its carbon border adjustment mechanism (CBAM) WTO-compatible. The WTO needs to work with developing countries to ensure protectionist fears are not realised and to increase global cooperation on climate change.
Currently the IMF is developing a phased approach to a global carbon price, and the WTO and OECD are engaged in joint analysis of carbon pricing. These international organisations are already collaborating in this area and should be encouraged to find a methodology that takes account of the views of developing countries.
Other
The Structured Discussions on Trade and Environmental Sustainability held by the WTO involve 71 member countries that are examining issues such as climate change; environmental goods and services; the circular economy; sustainable supply chains; greening aid for trade; and the environmental impacts of farm subsidies. A road map has been drawn up for work in 2022, including consultations with businesses and other stakeholders. Other environmental initiatives at the WTO include the Informal Dialogue on Plastics Pollution and Environmentally Sustainable Plastics Trade (IDP) and Fossil Fuel Subsidy Reform.
