Analysis-Climate change confined to mere annex in draft WTO deal

By Thomson Reuters Feb 28, 2024 | 6:00 AM

By Emma Farge

ABU DHABI (Reuters) – The World Trade Organization’s chief is on a mission to put climate change at the heart of its work as part of an effort she is leading to get the watchdog to square up to some of the world’s most pressing challenges.

But at a biennial WTO meeting in Abu Dhabi where negotiators hope to fix new rules for global commerce, the sole paragraph in a 56-page draft agreement that explicitly addresses the topic is stuck in an annex – with an explanatory note referring to “deep divergences” among members.

At first blush, it’s hard for an outsider to tell what is so controversial since the section merely pledges to “promote cooperation on environmental aspects of trade” and mandates a WTO committee to offer recommendations by the next major meeting in two years.

In a rare move, Director-General Ngozi Okonjo-Iweala has intervened to propose alternative language in the draft Abu Dhabi agreement and negotiations continue.

A commitment to sustainable trade is in the WTO’s 30-year- old founding document, with members aspiring to “protect and preserve the environment and to enhance the means for doing so”.

Yet, while it hosts brainstorming sessions among some groups of countries on climate change, it has no global negotiating stream on it.

Okonjo-Iweala, who recently appointed a special adviser on climate change, wants to confront the view of some ecologists that free trade is part of the climate problem because it generates transport emissions and can help drive carbon-intensive economic growth.

Instead, she argues the body can be part of the solution: by tackling fossil fuel subsidies, harmonising carbon price policies to prevent emissions merely being displaced to other countries or tackling import tariffs for low-carbon goods like electric cars, which tend to be higher than for combustion ones.

But some countries, like India, say the issue has no place on an WTO agenda it wants confined to pure trade matters.

“WTO should not negotiate rules on non-trade related subjects like climate change, gender, labor etc. Rather they should be addressed in respective intergovernmental organisations,” said India’s Commerce Minister Piyush Goyal, voicing a reticence felt by other developing countries.

Meanwhile, some wealthier states would prefer to go it alone with their own policies, trade experts say.

“They believe they have enough flexibilities under the rules as they are, and that a big multilateral negotiation on new rules would not be helpful, and could even constrain some of their future environmental measures,” said Dmitry Grozoubinski, executive director of trade policy think tank, the Geneva Trade Platform.


The debate over the climate change paragraph illustrates the difficulties Okonjo-Iweala has sometimes faced in prioritising the topic within an organisation that is supposed to be led by its members – all 164 of whom must agree by consensus.

Okonjo-Iweala, a former Nigerian finance minister, has warned about trade policy fragmentation if the WTO does not step in, citing the example of more than 70 existing carbon price schemes in the world.

But a presentation by the WTO’s Secretariat on a proposed global carbon price methodology last year in Geneva received a lukewarm reception, according to trade delegates who attended.

Jean-Marie Paugam, WTO Deputy Director-General, acknowledged that there were “different visions” on carbon pricing but that a WTO-led task force was making progress on the topic.

Overall, Okonjo-Iweala’s ideas on the WTO’s role in climate change have been well received, he said. “There is recognition of the DG’s leadership in terms of trade and climate,” he said.

An area of hope is that, since 2020, groups of countries keen to make progress on environmental topics are discussing ideas such as new rules constraining fossil fuel subsidies or bans on trade in some plastic goods.

“Now we are having a discussion on these issues, three years ago this would have been impossible,” said Carolyn Deere Birkbeck, Executive Director of the Forum on Trade, Environment and the SDGs (Sustainable Development Goals).

One day these talks known as “plurilaterals” may form the basis for broader negotiations on new rules binding for all countries, the trade experts say.

“This work is really foundational to inform what the membership may wish to do at the WTO,” said Canada’s Trade Minister Mary Ng. If the second part of a deal on cutting subsidies that lead to overfishing is agreed in Abu Dhabi after more than 20 years of talks, this could spur more progress.

Many developing states fear that countries’ new policies in this area, such as the EU’s carbon border tax, will place them at a trade disadvantage since they have fewer resources to decarbonise their industries.

The EU has said the tax is in line with WTO rules, affecting both domestic and foreign producers. It has proactively engaged with partners and made presentations at the WTO to explain its policies, an EU spokesperson said.

But for some, discussions around such tensions are exactly the right place for the WTO to start.

“What we do not want is a new form of protectionism to arise. But these are things that can only be treated if you are at the table engaging in the give and take,” said Kerrie Symmonds, minister of foreign affairs and trade for Barbados.

“We believe strongly the WTO has the convening power to host these types of discussions and facilitate them.”

(Reporting by Emma Farge; Editing by Mark John and Emelia Sithole-Matarise)