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    Advancing the Trade and Climate Change Agenda


    International Trade Forum - Issue 1/2010

    As countries grapple with the challenges of integrating economic interests with the management of climate change, trade and environmental policy have become increasingly entwined in the ongoing negotiations.

    International trade as a share of world gross domestic product rose from 5.5 per cent in the 1950s to 21 per cent in 2007, growing more than 32 times in terms of volume. At the same time, the share of developing countries participating in global trade has increased and they now account for 34 per cent of merchandise trade, nearly double their share in the early 1960s.1

    This expansion of world trade has led to an increase in greenhouse gas emissions - through, for example, the increased use of transportation services to ship goods over long distances - thereby exacerbating the effects of climate change. Consequently, multilateral efforts to extend international trade and carbon abatement measures have surfaced as having significant policy implications.

    An informal, multi-stakeholder dialogue could bridge the two agendas to inform solutions to critical stumbling blocks related to consistency and enforcement measures. For that reason, it is essential that governments, international organizations, the private sector and academics alike collaborate to prevent the divergence of trade and climate policy. Leading up to the next round of climate change negotiations in Mexico, this is a key consideration.

    Among the most prominent policy linkages, it is critical to address the challenges of constructing national and international climate change architecture while avoiding inter-governmental and legal contradictions with existing WTO rules. If climate change measures are judged to be inconsistent with the WTO dispute settlement rules, national actions stand to conflict with international actions, potentially undermining the climate change negotiation process itself.

    Other policy issues that the international trade and climate change agendas include are: the importance of the low-carbon growth agenda; the upscale of energy-efficient technologies; the adoption of renewable energy policies; the use of alternative fuels; and the need for green-friendly innovations in developing countries, to name just a few.

    Across all of these issues, two considerations may be particularly important to resolve in the coming months:

    First, how can compliance with a global climate change agreement be verified and enforced? What is a good model for the "monitoring, reporting and verification" of compliance with climate change obligations, and - provided consensus is reached on the development of such a mechanism - how could compliance be enforced? For example, is an analogous model to the WTO's Trade Policy Review (TPR) a feasible means of oversight? If not, what other mechanisms exist to normalize trade and climate into a process that is deliberative and legitimate?

    Second, how should the climate change global architecture be structured to be consistent with WTO's existing global rules? Understanding that little coordination currently exists between national and international actions to address climate change, national legislation may be in direct conflict with international law in the treaty establishing the WTO. As such, how can border measures and the avoidance of carbon leakage be addressed in a manner that does not violate WTO rules? And if cap-and-trade schemes gain domestic political support, can this be implemented without violating WTO rules on subsidies?

    Due to the complexity of these global issues and the host of actors involved in discussions, multi-stakeholder dialogue is needed to create solutions to these critical stumbling blocks. Only by finding solutions to these issues and creating a roadmap to multilateral consensus can trade become a driver for low-carbon growth in the future.

    1. World Trade Organization-United Nations Environment Programme. Trade and Climate Change. 2009

    * The views expressed herein do not necessarily reflect the institutional viewpoints of the World Economic Forum.

    The World Economic Forum is an independent international organization committed to improving the state of the world by engaging leaders in partnerships to shape global, regional and industry agendas. Incorporated as a foundation in 1971, and based in Geneva, Switzerland, the World Economic Forum is impartial and not-for-profit; it is tied to no political, partisan or national interests.

    For information, visitwww.weforum.org