Pushing exports behind the sustainability veil at WTO

November 23, 2021 5:00 AM

Despite the urgency of addressing climate change, global trade rules should not be allowed to create more imbalances and stunt the prospects of economic growth in developing countries

Trade talks: India, US to expand agri market accessTrade talks: India, US to expand agri market access

By Abhijit Das & Shailja Singh
While the dust may still be settling from the COP26 summit in Glasgow, it’s far from over for those looking to resolve thornier issues of global trade and environment. In fact, a veritable sandstorm may be kicked up in Geneva later this month at another crucial summit, this time at the WTO.

The 12th Ministerial Conference of the WTO (MC12) is likely to see developed countries once again try to ram home their historic—and plainly unfair—economic advantage, and tie down the developing world in a morass of binding commitments on trade and environment. It is important for us to understand exactly what these problematic obligations might be. Especially as we struggle to distribute the fruits of development to billions in the developing world.

In a clever move perhaps aimed at reducing the opposition of many from the Global South to negotiate multilateral trade rules on these issues, developed countries are attempting to sugarcoat this pill by using terms such as ‘dedicated discussions’ and ‘voluntary actions and partnerships’. While at this juncture the initiative does not encompass the entire WTO membership, many developing countries, including India, will come under pressure to eventually join it.

Of course, every nation needs to make dedicated efforts towards a low-carbon development pathway. But any greening of the economy in developing countries must go hand-in-hand with creating jobs and generating incomes through domestic manufacturing of many ‘green products’. Nations like India need to set up their own industries, technologies and systems to combat climate change and not be rendered dependent on imports from the developed world—an enormously expensive option.

Yet, binding rules that may emerge from negotiations on trade and sustainability could compel developing countries to become overwhelmingly dependent on imported low-carbon and ‘climate-friendly’ products and tech. There are five broad ways in which the sustainable trade agenda might be pushed forward by developed nations at the WTO.
One, there is likely to be a renewed impetus to get WTO member countries to eliminate customs duties on the so-called ‘environmental goods’. While this issue was a part of the agenda of the Doha Round of WTO negotiations, the deal wasn’t clinched.

Two, with the ostensible objective of improving resource efficiency, the proponents of trade and sustainability linkage are pushing the narrative of a ‘circular economy’. This, inter alia, involves repairing, refurbishing and recycling existing materials. An integral element of such a circular economy is the emphasis on removing restrictions and boosting trade in remanufactured goods. This proposal was also discussed during the Doha Round and rejected by many developing countries.

Imports of remanufactured goods, which tend to be cheaper than similar new goods, would make it very difficult for existing producers in developing countries to compete in the market. Further, developing countries are likely to be saddled with inefficient and obsolete technologies that may perhaps consume more energy than new products. In addition, increase in trade of remanufactured goods is likely to shift the burden of environmentally-sound disposal of these products from developed countries to developing ones.

Three, an integral part of the trade and sustainability agenda is the push towards creating international standards based on this circular economy, and also on other environmental performance considerations prevailing mainly in developed countries. If developing countries are mandated to base their technical regulations on stringent environmental standards, then this is likely to set the bar too high for their domestic producers. This would prevent them from selling in their own domestic market, thereby clearing the way for unimpeded imports.

Four, renewable energy, ironically a key part of any green plan for the Global South, would be hit. Under existing WTO rules, most developing countries have considerable flexibility in deciding purchasing specifications, as well as favouring domestic suppliers, in respect of procurement by governmental bodies. For renewable energy products, these flexibilities have been substantially eroded in some recent FTAs. If this trend is carried over to the WTO, then developing countries would lose an effective policy instrument for giving a fillip to domestic economic activities related to the manufacture of key products and systems required for generating renewable energy.

Five, a ‘trade and environment’ agenda might seek to provide a legal justification for imposing restrictions on international trade, supposedly for protecting the environment. Many developing countries apprehend that such restrictions would be aimed at curtailing their exports and could be used by developed countries for stiff protectionist purposes.

This is not all. The obligations listed are some examples based on what is contained in several FTAs pushed by developed countries, and also on recommendations made by some international environment organisations. The possibility of other onerous commitments emerging from the negotiating table in Geneva cannot be ruled out.
As noted in UNCTAD’s flagship Trade and Development Report 2021, the sustainability agenda based on trade liberalisation is likely to “undermine any notion of a just transition by disadvantaging developing countries that have least responsibility for climate-related damages.” This largely explains why India and many other developing countries have been firm in their opposition to the current trade and sustainability agenda of the developed world at the WTO.

Despite the urgency of addressing climate change, global trade rules should not be allowed to create more imbalances and stunt the prospects of economic growth in developing countries. Such inequality will also prove disastrous for the environment in the long run. It is to be hoped that India will continue to be at the forefront in meeting the formidable challenge of trade and environment linkage at the forthcoming MC12.

Das is head and Singh is associate professor, Centre for WTO Studies, IIFT, New Delhi. Views are personal

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