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Policy Analysis

Trade and Environment Agenda Inches Forward Ahead of MC12

Discussions on trade and environmental sustainability, plastic pollution, and fossil fuel subsidy reform within the WTO have continued to progress despite the postponement of the Twelfth Ministerial Conference. IISD’s Ieva Baršauskaitė takes a closer look at the activities taking place under the three main initiatives and their areas of focus ahead of the conference.

By Ieva Baršauskaitė on June 7, 2022

The postponement of the World Trade Organization’s (WTO) Twelfth Ministerial Conference last December disrupted many ongoing negotiating processes, but it did not stop the ministers of members willing to move ahead with trade and environment discussions. On December 15, the co-sponsors of three initiatives—the Trade and Environmental Sustainability Structured Discussions (TESSD), the Informal Dialogue on Plastics Pollution and Sustainable Plastics Trade (IDP), and Fossil Fuel Subsidy Reform (FFSR)—presented, outlining their roadmaps to examine the role of trade and trade rules in addressing the concerns of each initiative. Six months later, the ministers of the members involved will be able to take stock of the progress made and set out the next steps.

While falling under the broad brush of “environmental” initiatives, the membership and the scope of work of the TESSD, the IDP, and FFSR are quite different. Yet together they involve nearly half of the WTO’s 164 members, demonstrating the growing importance of environment and sustainability issues in the organization’s agenda. It is therefore worth taking a closer look at these initiatives and determining where they are going before trade ministers get to town.

History of Environmental Issues at the WTO

Environmental considerations have always been a part of the WTO’s mandate. The Marrakesh Agreement establishing the WTO clearly outlines the goal of “expanding the production of and trade in goods and services, while allowing for the optimal use of the world’s resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment and to enhance the means for doing so in a manner consistent with their respective needs and concerns at different levels of economic development” in its preamble. The 1994 Ministerial Decision on Trade and Environment established the Committee on Trade and Environment (CTE), which is tasked with identifying and understanding “the relationship between trade and the environment in order to promote sustainable development.” The CTE has long been the main multilateral forum for exchanges on trade and environmental issues among WTO members. The CTE also enables members to receive regular updates and trade-relevant information from multilateral environmental agreements (MEAs). See Jennifer Freedman’s interview with CTE Chairman Simon Manley in this issue of the Trade and Sustainability Review.

The Doha Development Agenda, launched in November 2001, included a mandate for negotiations on trade and environment issues, looking in particular at the relationship between WTO rules and multilateral environmental agreements, the collaboration between the WTO and MEA secretariats, and the elimination of tariffs and non-tariff barriers on environmental goods and services. However, these negotiations, which took place at a Special Session of the Committee on Trade and Environment (CTE SS), have never managed to produce any multilateral outcome.

Part of the CTE SS work was picked up by the 46 WTO members that launched plurilateral Environmental Goods Agreement (EGA) negotiations in 2014 seeking to promote trade in environmental products. These talks have been stalled since 2016, however. There are now discussions about the possible revival of the EGA talks in one of the three new environmental initiatives—TESSD.

The Three Sisters

The TESSD, the IDP, and FFSR are three different initiatives with different participants, including WTO members from all regions and all development levels. While membership of the TESSD, the IDP, and FFSR is limited, participation in their meetings is not: all WTO members can join the discussions without being signatories to the initiative. The broader WTO membership is also briefed on these discussions in CTE meetings. These initiatives serve as forums to deepen understanding and exchange good practices rather than negotiate, so no specific mandates or targets are involved. However, jointly agreed ministerial statements allow participants to better plan their activities and next steps. While some of these activities may produce outcomes as early as 2022 or 2023—possibly related to the collection of better information and data or support for best practices in policy design—all three initiatives are expected to produce a set of recommendations or other types of results at MC13.

Trade and Environmental Sustainability Structured Discussions

The TESSD initiative, launched by 50 WTO members in November 2020, focuses on promoting transparency and information sharing, identifying areas for future work in the WTO, supporting technical assistance and capacity-building needs (especially for least-developed countries), and working on “deliverables” of environmental sustainability in various areas of the WTO. The December 15, 2021, TESSD ministerial statement not only expanded the initiative’s membership to 71 but also identified a clear and narrower set of collective actions to be taken and adopted a roadmap for activities through December 2022.

The first half of 2022 saw the beginning of a wide range of workstreams for TESSD participants. The co-sponsors have prepared a work plan for the year that comprises six focus areas:

  • Dedicated discussions on trade-related climate measures and policies
  • Promoting and facilitating trade in environmental goods and services
  • Achieving a more resource-efficient circular economy
  • Promoting sustainable supply chains and addressing challenges and opportunities arising from the use of sustainability standards and related measures, especially for developing members
  • Challenges and opportunities for sustainable trade—capacity building and technical assistance (Aid for Trade)
  • Environmental effects and trade impacts of relevant subsidies

Activities in these areas are carried out by four informal working groups that focus on 1) trade-related climate measures, 2) environmental goods and services, 3) circular economy/circularity, and 4) environmental effects and trade impacts of relevant subsidies.

Working closely with the stakeholders from international organizations, civil society, non-governmental organizations, and the business community, TESSD co-sponsors have started active exchanges on the issues within the scope of each working group.

While the TESSD work plan does not include a ministerial gathering or ministerial statement at MC12, a high-level stocktaking event is planned in December and will review the progress achieved, including the identification of good practices, voluntary actions, and partnerships in relevant areas.

While the TESSD work plan does not include a ministerial gathering or ministerial statement at MC12 this month, a high-level stocktaking event is planned in December and will review the progress achieved, including the identification of good practices, voluntary actions, and partnerships in relevant areas, as well as adopt the next steps toward MC13. TESSD is now halfway through its preparations for this stocktaking event, with two more formal meetings planned in July and October.

Informal Dialogue on Plastics Pollution and Environmentally Sustainable Plastics Trade

The IDP kicked off at the same time as TESSD (November 2020) and has rapidly grown from the initial group of 7 to 70 WTO members willing to address the rising environmental, health, and economic costs of plastic pollution using trade as an instrument to reduce plastic pollution and promote environmentally sustainable trade in plastics. The IDP’s work in 2021 resulted in its ministerial statement in December 2021, which also outlined priority actions and the roadmap ahead for the initiative, aiming for “for concrete, pragmatic, and effective outcomes … at the latest by MC13.”

After the work plan was approved, three workstreams were launched to allow IDP members to engage in a well-structured discussion on the following topics:

  • Crosscutting issues, including fostering international cooperation and better availability of information and data on plastics, as well as technical assistance and capacity building.
  • Promotion of trade to tackle plastic pollution, including through more trade in substitutes and alternatives, environmentally sustainable waste management technologies, and reused and recycled plastics.
  • Circularity and reduction to tackle plastic pollution where IDP members are analyzing possible best practices in the efforts to reduce unnecessary or harmful plastics, including single-use plastics and packaging, as well as the experiences of moving toward more circular plastic trade.

The IDP process is conceptually linked to a parallel process at the United Nations, including the adoption of a historic resolution at the United Nations Environment Assembly (UNEA-5.2) agreeing to establish an Intergovernmental Negotiating Committee that will forge a global deal on plastic pollution before 2025. IDP participants aim to ensure coherence and complementarity between the two processes, including through the active inclusion of the stakeholders in the IDP process. International cooperation and partnerships with other international organizations are very important in the IDP. This was emphasized in remarks by WTO Deputy Director-General Jean-Marie Paugam at the Organisation for Economic Co-operation and Development’s annual Environment Ministerial Meeting in Paris, where he called plastic pollution and plastic trade “one of the most pressing environmental issues that the WTO is currently working on, alongside ongoing global negotiations on fisheries subsidies.”

The IDP work plan foresees four plenary meetings throughout 2022 accompanied by intersessional work. However, it is not yet clear if a high-level meeting will be scheduled this year.

Fossil Fuel Subsidies Reform

The process started at MC11, where 12 developed and developing WTO members issued a ministerial statement on fossil fuel subsidy reform affirming their intention to rationalize and phase out inefficient fossil fuel subsidies while considering the specific needs of developing countries and advancing this discussion at the WTO. Since then, the initiative has expanded to 44 members. The FFSR ministerial statement was published together with those of TESSD and the IDP in December 2021.

Fossil fuels—including coal, gas, and oil—were responsible for 86% of carbon dioxide emissions in the past 10 years. Subsidies for fossil fuel use and production have come under increasing scrutiny. In November 2021, the Glasgow Climate Change Conference (COP 26) for the first time referred to phasing out fossil fuel subsidies. COP 26 also witnessed the launch of the Beyond Oil and Gas Alliance aimed at aligning oil and gas production with the Paris Agreement’s aspirational goal to keep global warming below 1.5°C.

The FFSR joint ministerial statement followed the COP 26 pledge confirming, among other things, that the WTO “can play a central role in the reduction of trade and investment distortions caused by fossil fuel subsidies by achieving effective disciplines on inefficient fossil fuel subsidies.”

Rising energy costs aggravated by Russia’s attack on Ukraine in late February have prompted many governments to search urgently for ways to help consumers absorb the price shock. This, in turn, has reversed the downward fossil fuel subsidies trend.

Rising energy costs aggravated by Russia’s attack on Ukraine in late February have prompted many governments to search urgently for ways to help consumers absorb the price shock. This, in turn, has reversed the downward fossil fuel subsidies trend, with countries across the globe introducing tax breaks, price caps, and other measures. The broader need to move away from these subsidies, however, remains.

FFSR initiative members are assessing when and how to pick up their activities this year. However, it is clear that the issue is still on the radar of many WTO delegations, some of whom already discussed it at the March 31, 2022 TESSD meeting.

Where to Next?

TESSD, the IDP, and FFSR have shown that the WTO members can act on issues important to global trade and sustainability in a way that is still rather novel in the organization and that includes WTO members from all regions and at all levels of development: least-developed, developing, and developed countries. These discussions, and the formats chosen to pursue them, highlight the need for informal, non-negotiating exchanges about the role of trade in WTO members’ efforts to fight climate change, plastic pollution, and rising greenhouse gas emissions, as well as their strategy to reach the goals of Paris Agreement.

TESSD, the IDP, and FFSR firmly place the WTO at the centre of debates on the role of trade policy and the environment—at least, for those who are ready for such a conversation.

The three ministerial statements released last December reaffirmed the readiness of TESSD, IDP, and FFSR participants to continue their work despite the disruption caused to the WTO’s work by COVID-19. At MC12, we can expect these initiatives to become part of the conversation about the WTO’s future. While the ongoing fisheries subsidies negotiations might end up being the litmus test showing whether the WTO can produce a multilateral response to global sustainability challenges, it is quite clear that TESSD, the IDP and FFSR firmly place the WTO at the centre of debates on the role of trade policy and the environment—at least, for those who are ready for such a conversation.

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