The WTO Director-General’s Speech on Trade and Climate Change

[We are pleased to have the following contribution from Steve Charnovitz of George Washington University Law School in Washington, DC. Prof. Charnovitz is a well-known expert on international trade. Some of his many publications are available here. ]

On December 9, 2007, Pascal Lamy, the Director-General of the World Trade Organization (WTO), gave a thoughtful speech on trade and climate change to the Informal Trade Ministers’ Dialogue on Climate Change in Bali, Indonesia. The speech, titled “Doha Could Deliver Double-Win for Environment and Trade,” is posted on the WTO website.

One could have imagined a WTO Director-General attending the United Nations Climate Change Conference delivering a message that the attendees should remember that any solutions they craft has to follow WTO rules. But that was not Mr. Lamy’s precise message. Rather, he offers a sophisticated forward-looking view of the relationship between the climate change negotiation and the WTO.

True, Mr. Lamy did say that “there is no doubt that the rules of the multilateral trading system – as a whole (i.e., the WTO “rule book”) – are indeed relevant to climate change.” But he did not recite particular rules as providing normative guidance to climate negotiators. Nor did he repeat some of the incorrect statements about WTO rules regarding environmental measures that are still posted on the WTO website. (For example, see “Trade and Environment at the WTO,” at 21, asserting that certain energy taxes would not be adjustable at the border.)

Instead, Mr. Lamy’s message is a positive one and emphasizes the goals of coherence between the WTO and the climate change regimes. For example, he explains that “in working towards an international accord on climate change, countries will certainly have to reflect on the role of international trade within such an accord.” Furthermore, he notes that: “… much work is being conducted at the moment – in various quarters – on how the WTO tool box of rules may be leveraged in the fight against this environmental challenge.” He also states forcefully that “There is no doubt that an immediate contribution that the WTO can make to the fight against climate change is to indeed open markets to clean technology and services.”

What I found most remarkable, and refreshing, about Mr. Lamy’s speech was his theme that the WTO could be a norm taker from the climate change regime. The speech repeats that point so many times that it could not have been an unrehearsed thought. Consider the following:

My starting point in this debate is to say that the relationship between international trade – and indeed the WTO – and climate change, would be best defined by a consensual international accord on climate change that successfully embraces all major polluters.

An agreement of the UN Framework Convention on Climate Change:

must then send the WTO an appropriate signal on how its rules may best be put to the service of sustainable development….

A multilateral agreement, that includes all major polluters, would be the best placed international instrument to guide other instruments, such as the WTO, as well as all economic actors on how negative environmental externalities must be internationalized.
(N.B. The posted text may be wrong here and Mr. Lamy could have said “internalized.”)

In other words, energy must be properly priced, and the production processes adjusted accordingly. It would then be incumbent upon the trading system to respond to such environmental rules as soon as they are crafted.

The WTO has rules on subsidies, taxes, intellectual property, and so on. All of these tools can prove valuable in the fight against climate change, but in that fight, would need to be mobilized under clearer environmental parameters that only the environmental community can set.

As I interpret Mr. Lamy’s remarks, he is suggesting to the epistemic communities on trade and on climate that WTO rules would not stand in the way of a multilateral consensus on the optimal instruments to address climate change. Indeed, he is suggesting that the WTO is capable of adaptation to better support a strengthened climate regime. Had he wanted to make this a more concrete legal argument, Mr. Lamy could have said that existing WTO rules on goods and services have flexible environmental exceptions and that the interpretation of existing WTO rules can take into account “relevant rules of international law applicable in the relations between the parties.” He could also have noted the possibility of the enactment within the WTO of authoritative interpretations, waivers, and amendments.

In summary, Mr. Lamy has struck just the right note in his recent speech on trade and climate. Rather than arguing that WTO rules reduce governmental options, he emphasizes instead the possibilities for attaining more coherence between trade and climate policy.