Abu Dhabi conclave: The WTO must double down on climate talks

As its director-general Ngozi Okonjo-Iweala has said, policies on climate and trade need to be “mutually reinforcing,” not at odds.  (AP)
As its director-general Ngozi Okonjo-Iweala has said, policies on climate and trade need to be “mutually reinforcing,” not at odds. (AP)

Summary

  • Trade cannot be kept apart from climate action anymore. The WTO must work on fixing its dispute resolution mechanism, but mustn’t lose time on working out a deal that ensures fair trade and climate action aren’t at odds. It’s time to talk about carbon markets.

In an eerie echo of the protectionist 1930s, globalization has been in retreat this decade amid a fast deepening geopolitical divide. This explains feeble expectations of anything multilateral. So too of the 13th ministerial conference of the World Trade Organization (WTO) being held in Abu Dhabi. Ever since we lost a flawed but powerful promoter of free trade in the US, which has left the WTO’s dispute-resolving device in limbo since 2019, the cause has dawdled in the doldrums. The real irony of today’s global ‘polycrisis,’ however, hangs invisibly in the stale air around us. Trade talks are caught woefully out of step with the planet’s climate crisis. While market theory makes a cogent case against price distortions to secure our economic well-being both within an economy and across borders—asking us to squeeze the most out of scarce resources by letting unrigged forces of demand and supply allocate them—it confronts two hard-to-crack nuts: distrust of one another, a classic old rigidity, and the real cost of carbon, adjusted for a global net-zero goal. The WTO must address the latter with utmost urgency. Even as alternate means are sought to resolve trade disputes, time must not be lost on how carbon markets may be globalized. Indeed, this ought to assume equal priority at this week’s huddle.

India’s call for WTO reforms includes seeking two-tier dispute resolution and pushing for the old device’s revival. Since the WTO is based on the General Agreement on Tariffs and Trade, for its very basis to be upheld judiciously, the US and others must honour the G20 New Delhi Declaration calling for talks aimed at a “fully and well-functioning dispute settlement system accessible to all members by 2024." This deadline, set at the WTO’s meeting in 2022, must be met. As for other agenda items, on agriculture, India is looking for a “permanent solution" that grants our food security set-up WTO cover in the face of arguments that trade-distortive subsidies leave the world hungrier than need be. The state’s mandate to feed our own hungry means policy autonomy cannot be ceded on this. Fishery talks are another kettle; as Indian fisher-folk had no role in overfishing, India wants them duly shielded from any pact on subsidy cuts and fishing curbs. Also up for discussion are e-com tariffs, which are best held off, and investment facilitation, a trade-allied issue.

As an institution, the WTO must double down on climate talks to rally a response that does not warp free-and-fair trade. As its director-general Ngozi Okonjo-Iweala has said, policies on the two need to be “mutually reinforcing," not at odds. The EU’s carbon barrier, let’s admit, does aim to do that, even if clumsily. Using market incentives to choke gaseous exhaust is a worthy proposition, but gates slammed shut on imports with ‘embedded emissions’ to keep its carbon market leak-proof are untenably unilateral. Yet, while it nudges suppliers to decarbonize (or get priced out by a steep carbon tax), it also cues the idea of this model’s adoption by all stakeholders for the sake of our planet. Making polluters bid for a shrinking pile of exhaust licences through a cap-and-trade platform is interventionist, no doubt, but the stakes are high and it’s an idea whose time has come. If the WTO can work out how to integrate various carbon-trading platforms—each with a price that must necessarily vary by local aims and conditions—at fair rates of exchange, in line with justly borne climate burdens, we could conceivably achieve a level playing field by consensus. But trade can’t be kept apart from the climate. Not anymore.

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