Delegates from the group of World Trade Organization (WTO) members involved in new “structured discussions on trade and environmental sustainability” held their first meeting on 5 March 2021, exploring what issues this new process might cover and what level of ambition they may seek over the coming year.
The initiative was launched in November 2020 during the WTO’s Trade and Environment Week, where 53 WTO members said they planned “to collaborate, prioritize and advance discussions on trade and environmental sustainability,” naming, among other factors, the pressing challenge of climate change and the lessons learned from the COVID-19 pandemic.
The members pledged to use this work to “complement and support” existing WTO bodies, including the WTO Committee on Trade and Environment (CTE), and are looking to “where appropriate, propose concrete deliverables, initiatives and next steps” for consideration at ministerial level.
The work under the trade and environmental sustainability structured discussions (TESSD) includes presenting the members’ respective best practices and lessons learned, along with examining with other partners where technical assistance and capacity-building needs could arise. In their November statement, they also pledge to engage “external stakeholders” in this work, “including the business community, civil society, international organizations, and academic institutions.”
As the TESSD process gets underway, a major checkpoint in participating members’ work will be the WTO’s Twelfth Ministerial Conference (MC12), scheduled for the week of 29 November 2021, in Geneva, Switzerland. However, questions remain as to what the agenda of the structured discussions will entail, whether this group will seek to launch formal negotiations on any agenda items, and what risk there may be in duplicating work already underway in the WTO bodies or elsewhere.
The 5 March event included a statement by WTO Director-General Ngozi Okonjo-Iweala, who took office on 1 March. “Trade policies can help unlock the green investment and innovation needed to decarbonize our economies and create the jobs of the future,” she said.
Prior to the meeting, TESSD participants made nine submissions outlining what the structured discussions might cover, giving a sense of early priorities. Individual submissions came from Canada, the EU, Iceland, Japan, the Republic of Korea, New Zealand, Switzerland, and the UK. Australia, Singapore, and the Republic of Korea also submitted a joint communication.
Sources familiar with the discussion note that while these proposals sparked significant interest, as well as many questions, participating WTO members still have differing views on whether to prioritize a negotiating agenda or give more focus to exploratory work instead. What their future plan of work will ultimately entail, given the various priority items raised and the political sensitivities involved, also remains unclear.
Reforming environmentally harmful subsidies
New Zealand’s submission (INF/TE/SSD/W/1) is devoted entirely to the subject of fossil fuel subsidy reform, urging WTO members involved in the TESSD to incorporate it in their forthcoming work.
The move by governments throughout the world to pursue stimulus packages to revive their economies and rebuild from the COVID-19 pandemic, New Zealand says, “presents a window of opportunity to consider and eventually reform subsidies, and divert this public funding towards the recovery.” New Zealand also makes the case that fossil fuel subsidy reform has a natural substantive link to other priority items raised by WTO members involved in the discussions, such as the transition to a more circular economy. To that end, New Zealand sets out a schedule for how the structured discussions could organize their work on the issue.
Other members that refer to fossil fuel subsidy reform in their TESSD submissions are the UK and Switzerland. Meanwhile, Iceland’s submission refers to the issue of “environmentally harmful subsidies” more broadly, referring to those subsidies “that contribute directly to climate change and biodiversity loss” through their impacts on production and consumption patterns.
“WTO Members can build on previous work and established trade rules regarding industrial subsidies to discipline subsidies of products that cause environmental harm,” Iceland says in its submission, which also calls for placing the onus of the structured discussions on “topics that fall within the mandate of the WTO and can be linked to actual trade policy tools.”
Environmental goods and services
A recurring item across several submissions and which, trade sources say, was one of the major topics raised at the 5 March meeting, is whether and how to address the liberalization of environmental goods and services.
This subject has a long history in trade circles: the 2001 Doha Ministerial Declaration committed WTO members to negotiate “the reduction or, as appropriate, elimination of tariff and non-tariff barriers to environmental goods and services,” as part of a much wider agenda. After those talks faltered, parallel efforts to address environmental goods liberalization emerged in other forums.
The 21 Asia-Pacific Economic Cooperation (APEC) economies made a non-binding commitment in 2012 to slash tariffs on a list of 54 environmental goods by the end of 2015. Two years after the APEC announcement, a group of WTO members launched negotiations towards developing a tariff-cutting Environmental Goods Agreement (EGA), though those talks stalled in late 2016.
These efforts were primarily focused on tariffs, though the prospect of returning to the issues of non-tariff barriers and environmental services has been raised on various occasions over the years. Indeed, Japan’s submission to the structured discussions refers to its interest in exploring how to tackle non-tariff barriers in the area of environmental goods and taking a closer look at the issue of environmental services, according to a version of the document seen by the author.
Trade sources indicate that many WTO members spoke in favor of addressing at least environmental goods, though they did not agree on whether to use the EGA work as a starting point or to consider other options. The submissions circulated by several WTO members ahead of the meeting give early indications that this could become a priority track for the group’s work.
Canada’s submission, a restricted document, names the resumption of the EGA negotiations as one of its areas of interest. While Canada also refers to the possibility of exploring the issue of environmental services, the submission refers to the separate negotiations on services-related market access under the Council on Trade in Services in Special Session (CTS-SS) and the need to ensure that any work within the structured discussions does not repeat what is already being done there.
The joint submission from Australia, Singapore, and the Republic of Korea similarly calls for resuming negotiations on environmental goods and addressing environmental services. South Korea’s individual submission raises the same points, and notes that the work already done on environmental services under the Doha Round and the Trade in Services Agreement (TiSA) negotiations could be informative here. The TiSA negotiations stalled over four years ago, and the services market access talks under the CTS-SS have similarly seen no tangible movement in many years.
The UK’s submission also calls for revisiting the work undertaken under the EGA negotiations, according to a copy of their communication seen by the author, and specifically refers to environmental goods as a priority. On services, however, the UK notes the ongoing services negotiations within the WTO and the need to avoid duplicating efforts.
Switzerland, in an unrestricted submission, also refers to environmental goods and services liberalization as potential items for the structured discussions to consider. Similarly, Iceland’s submission raises the issue, suggesting that tackling trade barriers in this area “will support international commitments to combat climate change and contribute towards a more sustainable world economy.”
Border carbon adjustments and climate action
Both Canada and the EU are undergoing domestic processes that may involve the adoption of border carbon adjustment mechanisms (BCAs), which involve imposing duties on imports depending on how carbon-intensive these products are. The prospect of these BCAs, which have long been raised by policymakers as a way to address concerns over “carbon leakage,” has also sparked years of debate over whether such a mechanism will be compatible with WTO rules on non-discrimination.
Currently, Canada’s 2020 Fall Economic Statement states that a BCA will be the subject of both domestic discussions as well as international debate with other countries and country groups. The EU, meanwhile, is exploring the prospect of introducing a border carbon adjustment mechanism under its Green New Deal.
Canada’s submission to the structured discussions refers to BCAs as a possible sub-topic under the overarching topic of “trade-related aspects of climate change mitigation and adaptation,” while the EU’s submission also lists BCAs as an issue they would like to discuss in this forum.
Other WTO member submissions also refer to the value of exploring trade policy as a tool for climate action, while not citing BCAs directly. For example, the UK refers generally to climate adaptation and mitigation and the need for decarbonized supply chains. Switzerland also names climate adaptation as an issue of interest.
Trade sources note that while the proposals drew interest from some WTO members, a few others urged against addressing fossil fuel subsidy reform and BCAs in the TESSD work, suggesting that these issues are best suited for the UN climate talks or another forum.
Plastics, circular economy, and biodiversity
Other recurring items, both in WTO member submissions and during the discussions on 5 March, include the role of trade in tackling plastic pollution, supporting the transition to the circular economy, and protecting biodiversity.
Among those WTO members who raised circular economy and plastics in their submissions are Canada, Switzerland, and the UK. Switzerland and the UK also refer to biodiversity as an important item, while Switzerland also urges the group to explore “greening” the Aid for Trade initiative.
When the structured discussions were launched late last year, one of the paragraphs that drew significant notice among trade watchers was the reference to stakeholder participation and engagement. To that end, WTO members invited a select group of stakeholders to make interventions during the 5 March meeting, outlining issues that the TESSD could consider in setting the structured discussions’ agenda.
This is a significant novelty in WTO-related discussions, which traditionally are restricted to WTO members. While occasionally external organizations may be invited to give presentations, this is the exception rather than the rule.
Some of the submissions circulated ahead of the 5 March gathering make a point in supporting stakeholder engagement throughout the process.
For example, Iceland’s submission includes a dedicated section on stakeholder participation, stating that the inclusion of civil society, the private sector, academia, and representatives from other international organizations could help ensure the structured discussions yield “positive and concrete results,” while their exclusion could “diminish the likelihood of a meaningful outcome.” Trade sources say some other delegations also raised the importance of drawing in stakeholder expertise and input at the 5 March meeting.
The EU, while also supporting this engagement, outlines a different approach. “While we agree for co-sponsors to have a possibility of closed discussions, it is important to involve stakeholders, academia, and international organizations to provide fact-based data and ensure a transparent process promised in the communication,” the EU says, suggesting that “back-to-back sessions” could be set up for this purpose.
The WTO’s regular Committee on Trade and Environment, which encompasses the full WTO membership, is due to meet on 30 March. A stocktaking exercise of the WTO’s Aid for Trade Initiative is planned for 23-25 March and includes “inclusive and green recovery” as one of its themes. Both of these meetings could give further insights into how the structured discussions could proceed.
While meeting dates for the TESSD have not been formally announced on the WTO website, New Zealand’s submission refers to meetings that may be planned for 27-28 May, 16-17 September, and 24-25 November, just days before MC12 begins.
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By Sofía Baliño, Communications and Editorial Manager, Economic Law and Policy, IISD