TRADE
AND CLIMATE CHANGE NEXUS : A
WAY FORWARD+
Dr.Debesh
Bhowmik
JEL-
F13 , F18 , H23 , Q54 ,
Q56
Key Words – Trade policy
, Trade and Environment ,Environmental taxes and subsidies, , Climate ,Environment and Development
Introduction
The Stern Review[1]
calculated that the impact of climate change would be a loss of at least 5% of
global GDP each year and could be reach as much as 20% of global GDP at 2.5°C
and 75-250 million African people would experience water stress in 2020 and some African countries would suffer from
a 50% decline in agricultural yields. The required change in consumption and
production patterns will neither be easy to achieve nor occur without seriously
altering global trade patterns. Both climate change and measures taken to combat
it will thus have an impact on international trade.
Trade intersects
with climate change in a multitude of ways. In part, this is due to the
innumerable implications that climate change may have in terms of its potential
impacts and the profound regulatory and economic changes that will be required
to mitigate and adapt to these impacts. Climate change is expected to have an
impact on trade infrastructure and trade transportation routes. Literature
indicates that more open trade is likely to increase CO2 emissions
as a result of increased economic activity (the scale effect). On the other
hand, trade opening could facilitate the adoption of technologies that reduce
the emission-intensity of goods and the production process (the technique
effect) and lead to a change in the mix of production from energy-intensive to
less energy-intensive sectors if it is where it has a comparative advantage (the composition effect). Although most
studies to date have found that the scale effect tends to outweigh the technique
and composition effects in terms of CO2 emissions, it remains
difficult to determine in advance the magnitude of each of these three effects,
and therefore estimating the overall impact of trade on green house gas
emissions can be challenging.
Trade and
climate change are linked in multiple ways in the domestic and international
rules and institutions because climate change is already affecting the
productive base of international trade which may help or hinder climate efforts
by transferring climate friendly technologies or increasing transport-related
emissions. In the realm of climate policy such as new regulations or standards
may affect trade and competitiveness. On the other hand, trade policies may
influence economic activities and associated GHG emissions. Trade and climate
policies may also intersect with each other as a matter of law. Domestic
climate measures and climate negotiations are likely to be scrutinized in the
WTO rules. The linkage is essential in preamble of the WTO in the interest of
developing countries and achieving sustainable development.The existing WTO
agreements such as trade in goods,trade in services and protection of
intellectual property transverse the territory covered by climate issues and
institutions.Doha Work Programme in relation to agriculture,industrial products
and environmental goods and services may also affect efforts to mitigate and
adapt to climate change . WTO’s dispute settlement body may also come into play
in the event that climate-related trade disputes cannot be addressed through
diplomatic or other channels.
The association between trade and climate change measures in
the climate regime is governed by, among others, Art. 3.5 of the UNFCCC which
states that “measures taken to combat climate change, including unilateral
ones, should not constitute a means of arbitrary or unjustifiable
discrimination or a disguised restriction on international trade.” This
reflects Art. XX of the General Agreement on Tariffs and Trade (GATT), which
allows WTO Members to adopt measures that may be inconsistent with their WTO
obligations if such measures are, inter alia, “necessary to protect human,
animal or plant life or health” or are related “to the conservation of
exhaustible natural resources if such measures are made effective in
conjunction with restrictions on domestic production or consumption”, provided
that these measures “are not applied in a manner which would constitute a means
of arbitrary or unjustifiable discrimination between countries where the same
conditions prevail, or a disguised restriction on international trade.”
The climate
–trade nexus has gained increasing attention after Kyoto Protocol in relation to unilateral action and
multilateral efforts in GATT Article XX[2]
and in regional agreements in Article XXIV, for the interpretation of the
causal link required to justify environmental measures under Article XX(b) and,
by implication, XX(g). However, the relevance of WTO rules to climate change
mitigation policies, as well as the implications for trade and the
environmental effectiveness of these measures, will very much depend on how
these policies are designed and the specific conditions for implementing them.
The discussion
on trade-and-climate-change is also
expanding the notion of what constitutes “unfair” trade. For decades,
international trade law, as reflected in both the WTO system and the domestic
law of most trading nations, has recognized that pricing imports below certain
levels (whether due to “dumping” by foreign exporters or subsidies provided by
foreign governments) is a form of “unfair” trade that should be redressed where
it harms domestic industries. This notion of unfair trade is based purely on
how an imported product is priced. Climate change concerns are now expanding
the notion of unfair trade to take into account how imported products are made
- specifically, the volume and nature of the greenhouse gases associated with
their manufacture.
[1]
Stern
Review: The Economics of Climate Change, Executive Summary, available at
http://www.hm-treasury.gov.uk/
independent_reviews/stern_review_economics_climate_change/sternreview_index.cfm
+ The paper has been written to
show my gratitude ,respect and honour to Prof.Raj Kumar Sen who is my friend,philosopher and guide.
[2] For a
detailed explanation of Article XX, see WTO (2002).
For full article -see,Environment Problems and Challenges-Recent Issues and Opportunities(A Festschrift for Prof.Raj Kumar Sen)(2013)-Somnath Hazra,(Regal Publishers, NewDelhi), pp498-524
