international political assignment
chuckwamg94
example_briefingpaper.pdf
1
Trade and Green Economy
1. Introduction
The potential trade risks of a transition to a green economy
— protectionism, conditionality, subsidies — are issues of long
standing and not unique to the green economy. The urgency of
the global challenges which a green economy transformation is
intended to address, and the scale of the actions being taken by
many countries to build green economies, does however bring
renewed focus to these risks.
At the same time, the new greening of markets associated
with a green economy may provide opportunities for many
developing countries to find global markets for goods and
services with low environmental impacts. This will, however, test
the supply capacities of developing countries as reflected, for
example, in domestic trade infrastructure.
The green economy offers an opportunity to improve both
global trade governance and the domestic trade environment to
ensure that trade contributes positively to a green economy in
the context of sustainable development and poverty eradication.
2. Policy options for green transformation and
trade implications
As a growing number of countries adopt strategies and
policies to promote a transition to a green economy, this will
have implications for trade flows and trading opportunities. The
following external and internal measures and pressures, not
necessarily mutually exclusive, may serve as driving forces to a
transition to a green economy via international trade.
1) Local regulations and rules. For example, some U.S. states
have imposed recycling requirements on newsprint, which is
likely to have significant implications for the forest industries of
its trading partners.
2) Environmentally-driven consumer pressure from major
customers: For instance, the Chief Executive Officer of one of
Canada’s most competitive paper companies remarked that the
pressures from his European customers have become so severe
that he is now running his mills to European, rather than
Canadian, standards.
3) National legislation and plans: For example, many Chinese
business leaders expect to face much stronger environmental
regulations and an environmental tax over the next five years
under China’s 12th five-year plan. Many are building major
changes into their long term trade and investment planning to
accommodate the need for sustainable development.
4) Unilateral policy measures: Many countries seem committed
to the use of trade measures to persuade other countries to
change their domestic environmental practices, despite the fact
that many measures may be contrary to GATT-WTO rules (see
Table 1 and discussion).
5) International environmental, climate change
agreements/conventions: The outcome of negotiations on
climate change will have an influence on trade, e.g., by affecting
the consumption of various natural resources which are traded
and shifting demand for various low-carbon technologies (see
Table 1).
Some countries have expressed concerns that a green
economy transition could cause their export industries to
experience declining demand or competitiveness. 1 These
concerns can be real and need to be addressed through pro-
active policies at both national and international level. 2
Competitiveness and environmental standards are often
considered enemies. There is evidence, however, that trade
policy and environmental policy can act as complements in the
development of conditions within which firms can innovate and
become more internationally competitive. 3 Germany and Japan
have amongst the toughest environmental regimes in the world,
yet both are among the most able to compete internationally.
Their strategies are clear: innovate now and capture markets in
the future. It should be stressed, however, that technological
capacity is key to such success.
Table 1 shows three broad categories of policy measures:
regulatory measures, fiscal measures and trade capacity
development measures which may affect trade. The 'traffic lights'
in the right-hand column provide simple signals by assessing
GATT-WTO rules and disciplines. Green light illustrates that policy
measures are generally free from trade concerns. Yellow light
requires moving slowly with caution and underlines the need to
revisit the rules to seek further clarity. Red light means "stop" or
“no-go-zone” under current WTO rules. The following sub-
sections discuss each of these green transformation measures,
their trade-related concerns and proposed responses.
1 See Cosbey‘s (2010) analysis on trade and competitiveness impact.
2 See the subject of Rio 2012 Issues Brief #4 on New Growth Strategies in a Green
Economy. 3 For example, Japan refused to shelter its industry from the oil shocks of the
1970s. Indeed, it increased the domestic pressure by adding taxes to the price
increases. This contributed to Japanese industry’s inventing the energy efficient
technology of the 1980s.
March 2011
Produced by the UNCSD Secretariat and UNCTAD No. 1
RIO+20 Issues Briefs
www.uncsd2012.org
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2.1 Environmental regulations, standards, labelling
and certification
Concern: There is a large body of environmentally-related rules
and regulations. 4 The regulations, standards and labelling may
represent significant obstacles to market entry.
Suggestion: One type of standard with potential to promote a
green economy dictates the energy efficiency of a product in use.
But different countries all have different standards, meaning
higher costs for exporters and less dissemination. An
international harmonization of standards and labelling would be a
solid step towards lowering entry barriers, but there is no obvious
forum for such harmonization (Cosbey, 2010).
2.2 Unilateral border carbon adjustments (BCAs), air and
sea transport levies
Concern: The risks associated with environmentally-related
border tax policies are that they may be disguised protection of
domestic firms. Countries could face significant difficulties in
establishing that the proposed border measure would be
compatible with WTO rules. In particular, border tax adjustments
or international transportation levies have the potential to impact
negatively trade and the conditions of competition for developing
country exporters, or to penalize them unfairly.
Suggestion: The solution may be regime design, ideally based on
internationally agreed principles (Cosbey, 2010). 5 Nevertheless,
the issue of BCAs will likely remain on the table in the
negotiations on climate change, in the trade negotiations of the
Doha Development Agenda and in the multilateral trading system
in the near term. Some have suggested that a firm Multilateral
Environmental Agreement (with explicit reference to trade
measures) can form the basis for origin-based charges on traded
goods. 6 This requires strong carbon monitoring, reporting and
verification (MRV). In the absence of a global agreement, MRV
may be developed on a bilateral or regional basis.
2.3 Subsidies and domestic support mechanisms
Concern: Recently, there have been a number of trade disputes
related to 'green subsidies' and domestic support for green
sectors. For example, the US government has petitioned in late
2010 to take China to WTO dispute settlement for its support to
clean energy sectors. One question is whether environmental
threats like climate change might provide a strong enough base
to re-examine the WTO rules on domestic support to ensure that
renewable energy can be promoted effectively.
4 For details of a sectoral analysis, see Cosbey, 2010.
5 For example, one of the key negotiation issues on taxing international
transportation is how to build on special and differential treatment principle so
that small and vulnerable economies, such as small island states dependent on
tourism trade, are protected. 6 See Sussex Energy Group Policy Briefing, No. 8, May 2010.
Suggestion: In discussing specific subsidy-related rules of
relevance to climate change, some have suggested the careful
revival of an expired clause in the WTO subsidies agreement
specifying that certain environmental subsidies were "non-
actionable" (meaning that they are permitted) as a way of
encouraging support for clean technologies (ICTSD, 2008). In this
regard, developing countries have proposed that the
environmental subsidies they provide shall be considered “non-
actionable” under WTO rules.
2.4 Technology transfer and intellectual property rights
Concern: Intellectual property rights (IPRs) have long been a tool
to promote innovation and the dissemination of new ideas and
inventions. 7 The crucial issue is how they help or hinder
developing countries’ gaining access to technologies and
enhancing indigenous technological capacity for their
development (Cosbey, 2011).
Suggestion: A global green economy package could promote the
faster development of green technologies through collaborative
arrangements that enshrine the sharing of technologies and the
utilization of financing mechanisms like the green climate fund to
acquire and place in the public domain IPRs for key climate-
related technologies. These types of initiatives would be a solid
step toward a green economy (ICTSD, 2008).
2.5 Liberalization of environmental goods and services
Concern: Liberalizing trade in environmental goods and services
(EGS) has been on the agenda of the WTO Doha Round since the
beginning. Yet, very little has been achieved. Two particular areas
of controversy involve "dual use" technologies that may be used
to reduce emissions as well as meet other consumer needs, and
agriculture products.
Suggestion: Any liberalization package will need to be
complemented by a set of financial and technical assistance
measures. The impact of trade liberalization for climate change
mitigation efforts will only be as effective as the broader enabling
framework within which it is put into play (ICTSD, 2008).
Developing countries need to have the prospect of developing
capacities to compete domestically and internationally in the EGS
industry.
7 Odagiri, H. et al eds. (2010), Intellectual Property Rights, Development, and Catch
Up: An International Comparative Study, Oxford University Press.
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Table 1. Examples of green transformation measures and related trade implications
Green transformation measures Assessing GATT-WTO compatibility
Examples of regulatory measures WTO-rule compatibility and conditions
Energy efficiency standards
1) These have been introduced in most OECD countries,
but also in certain developing countries.
2) In 2006, 57 countries with 80 percent of the world’s
population had energy efficiency standards and labeling
programs in place.
Yellow light:
WTO’s Technical Barriers to Trade agreement prohibits
standards that create unnecessary obstacles to trade,
and favors international standards over national ones.
Environmental labeling schemes
For example, carbon labeling schemes describe the carbon
dioxide emissions created as a by-product of
manufacturing, transporting, and disposing of a consumer
product.
Yellow light:
It is unclear whether labeling can be based on process
and production methods (PPMs) that do not affect the
end characteristics of final products.
The WTO-US Shrimp-Turtle case seems to give a green
light, subject to conditions for acceptability. 8
Regulations, standards and targets for renewable energy
1) China: 15 percent from renewables by 2020;
2) EU: 20 percent of energy from renewables by 2020;
3) US: 35 billion gallons of alternative fuels in 2017.
Green light:
National targets for renewables per se do not generally
raise trade concerns so far. However, government
measures to achieve the targets may raise trade
concerns.
Examples of fiscal measures WTO-rule compatibility and conditions
Domestic carbon and energy taxation
1) Energy taxes on consumption;
2) Embedded carbon taxes proposed in some countries
but actually implemented in few.
Green light:
Domestic carbon and energy taxes do not raise trade
concerns as long as national treatment and non-
discrimination principles apply.
Carbon/energy tax on imports or exports
Border tax adjustment on imports/exports proposed in
some countries but not yet implemented in any.
Yellow light:
1) Under GATT rules border tax adjustments are possible
for taxes levied directly on products.
2) It is unclear whether adjustment can be made for
taxes on unincorporated input (such as energy) during
the production of goods.
Subsidies and domestic support mechanisms part I
Subsidies to biofuels are common in many developed and
developing countries.
Subsidies and domestic support mechanisms part II
Subsidies to renewable energy
Red light:
The SCM (subsidies and countervailing measures)
agreement of WTO does not allow enterprise- and
sector-specific subsidies, if they cause adverse effects
for foreign producers.
The Agreement prohibits two types of subsidies: those
contingent on exports and those contingent on the use
of domestic over imported goods. 9
Sustainable government procurement
Green procurement policies in several countries
Green light:
Environmental factors can be taken into account in
government procurement decisions under the WTO
Agreement on government procurement (GPA)
Examples of capacity development measures WTO-rule compatibility and conditions
Trade facilitation, promotion, and financing, as well as Aid-
for-Trade for green sectors 10
See Section 3.
Green light:
Trade facilitation and trade finance do not generally
raise trade concerns so far.
Note: The current institutional home for global trade rules and disciplines is WTO. However, the current WTO rules seem to be not clear on the
principles for the design and implementation of trade-related instruments for a green economy, as there is no multilateral consensus on best practices
yet. The aim of developing this table is to serve as a reference for policy deliberation on trade rules and green economy.
Source: adapted from ICTSD, Climate Change and Trade on the Road to Copenhagen, 2008, http://ictsd.org/i/publications/12524/.
8 For details of the conditions and analysis, see Cosbey (2010) and Cosbey (2011).
9 For a possible extensions of the scope of energy subsidies to include exemptions from user fees or general taxes and environmental externalities, see
http://www.climatepolicyinitiative.org/. 10
For illustrative green sectors, see Table 2.
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2.6 Sustainable public procurement
Concern: Not counting compensation to public employees, public
procurement is estimated to represent 6-10 percent of GDP. With
sustainable public procurement, governments can select and
purchase products and services that minimize adverse
environmental and social impacts. This can in turn create critical
mass for market development. Sustainable government
procurement is sometimes accompanied by a requirement for
domestic content or sourcing.
Suggestion: Domestic content requirements would probably
breach the non-discrimination provisions of the WTO Agreement
on Government Procurement (GPA) (Cosbey, 2010). However,
most developing countries are not parties to the GPA and would
as result be immune from direct challenge under international
law for utilizing social and/or environmental criteria
(Kjöllerström, 2008, Sustainable Development Innovation Briefs,
DESA).
3. Trade promotion and financing — the positive agenda
Table 2 illustrates selected green sectors that have export
potentials. Trade facilitation and financing in these fast growing
sectors could assist exporters in seizing new green export
opportunities, from organic fruits to clean technologies.
Table 2. Selected green sectors with trade potentials
Agriculture
Organic agriculture in Uganda (UNEP Green Economy: Developing countries success
stories, 2010)
Certified sustainable agriculture in Hawaii (Food Alliance, United States of America)
Fisheries
Sustainable native fish management in Peru (UNCTAD Biotrade Initiative)
Sustainable tuna fishing (Marine Stewardship Council)
Forests
Sustainable forestry practices for pulp and paper production in Brazil (Program for
the Endorsement of Forest Certification, Brazil)
Tourism — trade in services
Sustainable sea tourism in Honduras (Coral Reef Alliance)
Conservation charging in Abrolhos Islands (Brazil, IBAMA)
Energy
Hydro power exports in Lao PDR a (Ministry of Energy and Mines, Lao PDR,
www.poweringprogree.org )
Biofuel production in Brazil (Brazilian Ministry for Mines and Energy)
China — the world’s largest producer and export of solar photovoltaics (Ren21, 2010)
Sahara Desert Solar Project for solar electricity export to Europe (Bloomberg, March
08, 2010)
Manufacturing
Lean manufacturing in Japan (Toyota Production System)
Renault (France) pledge to use set percentages of recycled plastic in its cars (EU,
2010)
Global low-carbon supply chains (Carbon Trust, 2006, Carbon footprints in the supply
chain)
Waste recycling and water treatment technologies (ICT, 2010) Source: Author.
Note: a In 2008 the hydropower exports amounted to about 30% of total Lao PDR's exports. Agreement for future
hydropower exports are in place with Thailand, Viet Nam and Cambodia. However, with these hydropower projects, villages
disappeared under the reservoir — and tens of thousands more living downstream have been affected. Not everyone considers
these exports sustainable without thorough environmental assessment as well as sufficient resettlement and adaptation support.
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3.1 Targeted trade facilitation — minimizing non-tariff
barriers for green trade
Concern: Small producers can be disadvantaged by mandatory
certification schemes. Trade facilitation and capacity building
programs need to help relieve the certification burden on small-
scale producers. For example, the cost of certification remains
one of the most contentious issues in organic agriculture both for
small scale farmers and for commercial operators.
Suggestion: One option is the creation of a government
institution helping to facilitate affordable inspection and
certification services. For example, the Conservation Agriculture
Trust of Kenya (CATOK), a non-profit trust duly registered under
the Trustship Act of Kenya, was formed to assist farmers and
agricultural exporters access the services of internationally
recognized organic inspectors and certification bodies (Ndugire,
2010, UNECA African Trade Policy Centre, No.80).
Moreover, the transition to a green economy will mean a
large-scale transfer of technologies and acquisition of
technological capabilities in developing countries. Trade
facilitation can increase the transfer and diffusion of clean
technologies to developing countries by enhancing transparency
of trade and business regulations and the rule of law.
3.2 Trade finance — a green trade enabler
There is an opportunity to mobilize committed trade
financing to strengthen a global green economy package and
enhance the transition to a green economy (see Box 1). The
Green Climate Fund recently agreed at Cancún could be a source
of trade facilitation financing packages to assist poorer countries
to finance development of new green sectors with export
potential. A global program of green trade financing in developing
countries may be helpful to create synergy between international
and national initiatives.
3.3 Aid-for-Trade
The WTO work program on Aid-for-Trade aims to mobilize
additional funding to help suppliers from developing countries
build capacity to compete in international markets. Depending on
country demand, it could play an important role in promoting
trade in green products. The UNDP Project on “Aid-for-Trade in
Central Asia: Support to Economic Development along Trade
Corridors” aims to enhance private sector capacity to increase
exports, with a special focus on promotion of environmentally
friendly technologies and green commodity production.
Box 1. The new trend in green trade financing
Republic of Korea Export-Import (EXIM) Bank plans to develop a Green Pioneer Program that provides
US$20 billion annually until 2020 to 200 selected green enterprises in the field of renewable energy.
According to the Chairperson of the Bank, the Program is developed to promote the exports of green
industry as a future growth engine and applies the strategy of creating an overseas market to help
companies strengthen their track records and accumulate business development experience. The
Program is planned to launch by the first half of 2011. b
The Japan Bank for International Cooperation (JBIC) has recently signed a US$20 million untied loan
agreement with the private Turkish commercial bank Denizbank to finance renewable energy trade loans.
It also signed a green memorandum of understanding (MoU) with the Banco Nacional de Obras y Servicios
Públicos to implement green operations in Mexico.
Eight U.S. government agencies, including Export-Import Bank of the United States and U.S. Trade and
Development Agency, have launched a coordinated effort to promote renewable energy and energy
efficiency exports, the Renewable Energy and Energy Efficiency Export Initiative (RE&EE). c
ECGD, the UK’s export credit agency, is in negotiations with Indian banking institutions to establish two
$100 million credit lines, one of which will be earmarked for renewable energy projects.
Source: Trade Finance magazine (various dates).
b See http://www.korea.net/news.do?mode=detail&guid=51748.
c See http://www.export.gov/reee/eg_main_023036.asp.
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4. Conclusions
Countries may take measures to make trade policy respond
better to social development and sustainable development
objectives, including international commitments to poverty
reduction, food security, quality jobs, and environmental
sustainability. These measures may actually have positive impacts
on green exports but some may raise concerns from trade
partners. As suggested by UNCTAD (2011), the international
community must agree upon the principles for the design and
implementation of trade-related instruments in relation to a
green economy.
In conclusion, this brief provides guidance on issues to be
addressed to reinforce trade, green economy, and sustainable
development complementarities.
1) Identify and address trade-related obstacles to a green
economy
2) Ensure trade rules enable the transition to a green economy,
e.g. ensure trade rules provide policy space for development and
for the technology diffusion and acquisition necessary for a low-
carbon development trajectory
3) Discuss and resolve issues of regulation, standards, labelling
and certification to ensure they do not constitute unjustified non-
tariff barriers to trade
4) Discuss and resolve issues of unilateral border carbon
adjustments
5) Discuss and resolve treatment of green energy and industry
subsidies
6) Conclude and implement effective Doha Round agreement
on environmental goods and services
7) Embrace green trade opportunities by pro-active trade
promotion and facilitation programs
8) Ensure access to affordable trade finance, particularly for the
poorest countries, and particularly for sectors and activities
related to a green economy
9) Finance green technology transfer and public procurement of
key patents on latest generation green technologies to put them
in the public domain
10) Provide Aid-for-Trade on promotion of environmentally
friendly technologies and green commodity production.
These issues may require the further attention of all parties
and stakeholders. Many questions remain unanswered and will
need to be discussed in effective multilateral forums. Further
research and policy deliberation would assist in filling knowledge
gaps and contribute to preparation of countries for the Rio+20
conference and, eventually, a successful transition to a green
economy.
Key Reading
Cosbey, Aaron (2011) “Trade, sustainable development and a
green economy: benefits, challenges and risks”, Ch. 2 of The
Transition to a Green Economy: Benefits, Challenges and Risks
from a Sustainable Development Perspective, Report by a Panel of
Experts for the UNCSD’s 2nd PrepCom Meeting, March.
Cosbey, Aaron (2010) "Are there downsides to a green economy?
The trade, investment and competitiveness implications of
unilateral green economy pursuit", background paper for Ad Hoc
Expert Meeting on the Green Economy: Trade and Sustainable
Development Implications, UNCTAD, Oct., Geneva, Switzerland.
UNCTAD (2011), The Road to Rio+20 For a Development-led Green
Economy, United Nations publications,
UNCTAD/DITC/TED/2010/8.
UNCTAD (2010) "The green economy: trade and sustainable
development implications", background note for Ad Hoc Expert
Meeting on the Green Economy: Trade and Sustainable
Development Implications, UNCTAD, Oct., Geneva, Switzerland.
The purpose of the Rio+20 Issues Briefs is to provide a channel for
policymakers and other interested stakeholders to discuss and
review issues relevant to the objective and themes of the
conference, including a green economy in the context of
sustainable development and poverty eradication, as well as the
institutional framework for sustainable development.
For further information on this Brief, contact Wei Liu
