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Global Trade Liberalization Crucial as Developing Countries Address Climate Change

Available in: Français, العربية, 中文, Español
News Release No:2008/117/SDN


Roger Morier  +1-202-473-5675

Kristyn Schrader  +1-202-458-2736


WASHINGTON, November 14, 2007―A new report from the World Bank,  International Trade and Climate Change: Economic, Legal, and Institutional Perspectives, says liberalization of the global trading system will be a key factor in helping developing countries reduce their greenhouse gas emissions and adapt to climate change.


“Climate change is a global challenge requiring international collaboration,” said Warren Evans, Director of Environment, World Bank.  “One area where countries have successfully committed to a long-term multilateral resolution is the liberalization of international trade.  Integration into the world economy has proven a powerful means for countries to promote economic growth, development, and poverty reduction.”


Said Evans, “Improving future human welfare is a goal shared by both global trade and climate regimes.  Yet both climate and trade agendas have evolved largely independently through the years, despite their mutually supporting objectives.  Since global emission goals and global trade objectives are shared policy objectives of most countries, and nearly all of the World Bank’s clients, it makes sense to consider the two sets of objectives together.”


International Trade and Climate Change is one of the first comprehensive attempts to look at the synergies between climate change and trade objectives from economic, legal, and institutional perspectives. 


The report describes how the trade-environment debate has so far considered little in terms of global-scale environmental problems – climate change, declining biodiversity, the depletion of ocean fisheries, and the over-exploitation of shared resources.  These ‘public goods’ issues, which require international cooperative action, can potentially lead to trade tensions if some countries get a ‘free ride’ on the environmental efforts of others.

The report points out that although mechanisms such as the Kyoto Protocol (and other multilateral environmental agreements) deal with global environmental issues, none of the agreements have universal membership. This imbalance could lead to conflict as treaty-member countries adopt measures to comply with the global agreements, which could be made binding on World Trade Organization (WTO) members who are not parties to the same treaties.

According to Muthukumara Mani, Senior Environmental Economist, the World Bank, “The broad objective of this study is to analyze areas in which the climate change agenda intersects with multilateral trade obligations. The study identifies the key issues at stake, as well as possible actions – at the national and multilateral levels –that could help developing countries strengthen their capacities to respond to emerging conflicts between international trade and global climate regimes, while taking advantage of new opportunities.”


Although there is potential for conflict between trade and the emerging global environmental regime to combat climate change, the report says that some issues currently on the agenda of the WTO could potentially be harnessed to promote broader global environmental objectives.  For example, a multilateral liberalization of renewable energy sources or an agreement to remove fossil fuel subsidies would equally serve climate change objectives.


The WTO negotiations on environmental goods and services could be used as a vehicle for broadening trade in cleaner technology options and thereby help developing countries reduce their greenhouse gas emissions and adapt to climate change. Similarly, a more transparent and justifiable labeling and standards regime could serve the interests of both trade and global environmental objectives. In addition, more uniform pricing of energy under the UNFCCC could negate some trade issues regarding competitiveness and leakage.


The report recommends that the international community, among other actions:


          Focus on a few areas where short-term synergies already exist:The energy efficiency and renewable energy technologies needed to meet future energy demand and reduce GHG emissions below current levels are largely available. WTO parties can do their part by considering liberalizing trade in climate-friendly and energy-efficient goods as a part of the ongoing Doha negotiations to support Kyoto. Within the UNFCCC, it would also help to accelerate and bring greater clarity to the technology transfer agenda. Within the Kyoto Protocol, the most important priority regarding the linkage to trade would be to facilitate a uniform approach to pricing of greenhouse gas emissions.


          Remove tariff and non-tariff barriers (NTBs) to increase the diffusion of clean technologies in developing countries.Access to climate-friendly clean energy technologies is especially important for the fast-growing developing economies. The study finds that removing tariffs and NTBs for four basic clean energy technologies (wind, solar, clean coal, and efficient lighting) in 18 of the high-GHG-emitting developing countries could result in trade gains of up to 13 percent. If translated into emissions reductions, these gains suggest that—even within a small subset of clean energy technologies and for a select group of countries—the impact of trade liberalization could be significant.


          Streamline intellectual property rights, investment rules, and other domestic policies to stimulate the widespread assimilation of clean technologies in developing countries. While FDI is the most important means of transferring technology, weak (or perceived weak) intellectual property rights (IPR) regimes in developing countries often inhibit diffusion of specific technologies beyond the project level.  Developed country firms, which are subject domestically to much stronger IPRs, often transfer little knowledge along with the product, thus impeding widespread dissemination of the much-needed technologies. Further, FDI is also subject to a host of local country investment regulations and restrictions. Many of these countries also have low environmental standards, low pollution charges, and weak environmental regulatory policies.

  Explore more the huge potential for trade among developing countries (South-South trade) in promoting clean energy technology.Traditionally, developing countries have been importers of clean technologies, while developed countries have been exporters.  With their improving investment climate and huge consumer base, developing countries are becoming major players in manufacturing clean technologies. These developments augur well for a buoyant South-South technology transfer in the future.


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