Trade policy tools can help countries increase low-carbon goods uptake by reforming import tariffs, rethinking government procurement and promoting trade facilitation, said Director-General Ngozi Okonjo-Iweala on December 4.
Speaking at the launch of “Trade Day” at the United Nations Climate Change Conference (COP28) in Dubai, DG Okonjo-Iweala stressed this thematic day should inspire world leaders to make fuller use of trade as part of the climate action toolkit.
WTO is co-leading “Trade Day” with the United Arab Emirates (UAE) at COP in cooperation with the United Nations Conference on Trade and Development (UNCTAD), the International Chamber of Commerce (ICC), the World Economic Forum (WEF) and the Abu Dhabi Department of Economic Development (ADDED). Opening the day, global leaders addressed how to work together to promote a roadmap of trade policy options for a just and ambitious response to climate change.
DG Okonjo-Iweala highlighted that the international community remains well short of the Paris Agreement targets. She said that the trillions of dollars of low-carbon investments needed to achieve those targets are now facing higher borrowing costs. Against that background, she stressed that trade can help deliver greater emission reductions for each dollar spent and repurpose harmful subsidies to assist climate action. “The fact is, we cannot get to net-zero without trade because it is indispensable for spreading low-carbon technology to everywhere it is needed,” she noted.
“Trade is about people, a tool for improving their lives and their livelihoods, and for promoting sustainable development as enshrined in the Marrakesh Agreement that set up the World Trade Organization,” noted DG Okonjo-Iweala in her opening remarks. To deliver on that, the WTO has been working to advocate for trade as part of the climate response and to produce research and analysis on the complex relationship between climate change and trade.
She referred to the 10-point set of “Trade Policy Tools for Climate Action”, the new WTO publication launched on 2 December that explores how integrating trade policy options, such as reviewing import tariffs on low-carbon solutions, into national strategies can help economies mitigate the effects of climate change and adapt to its consequences. “We hope that you find it useful as we move towards dealing with this existential threat that is climate change,” she said.
For the first time, trade is featured as a specific theme at COP. Throughout the Conference, a Trade House is hosting in-depth discussions on how trade and trade policies can help address different aspects of the climate challenge. The pavilion is hosted by the WTO, ICC, UNCTAD and the International Trade Centre (ITC).
The Director-General focused on three issues: reviewing and rebalancing import tariffs, rethinking government procurement and facilitating trade.
On the first issue, DG Okonjo-Iweala highlighted that currently carbon-intensive goods often face lower import duties than low-carbon alternatives. “Renewable energy equipment faces average tariffs that are twice as high as those for coal, and low-carbon vehicles often face higher tariffs than those for vehicles running with internal combustion engines. Correcting that would help increase the uptake of green technologies,” she said.
Regarding government procurement, governments spend around US$ 13 trillion in public procurement every year, accounting for roughly 13% of global GDP and 15% of global greenhouse gas emissions. DG Okonjo-Iweala stressed that “by bringing climate sensitive criteria such as low-carbon requirements into public tenders, combined with open competition in line with the WTO Government Procurement Agreement, would also help ensure value for taxpayers’ money.”
On facilitating trade, she referenced the blocked ports and backed-up border crossings that became a source of inflationary pressure during the pandemic. “By implementing trade facilitation measures like those set out in the WTO Trade Facilitation Agreement, things like encouraging electronic documentation and streamlining inefficient customs procedures, countries can help reduce border control delays and related energy consumption. This has led to reductions of up to 85% of trade-related emissions at certain land border crossings that we’ve monitored,” she said.
“All these issues go to the heart of delivering a people-centred green transition, bringing down the cost of clean energy, decarbonizing supply chains, and creating new job and business opportunities in the emerging low-carbon economy,” she added.
The DG’s intervention was followed by a panel discussion with the participation of government representatives, international organizations and the private sector.
Dr Thani Al Zeyoudi, Minister of State for Foreign Trade of the UAE and Chair of the 13th WTO Ministerial Conference (MC13) to be held in Abu Dhabi in February 2024, emphasized the importance of embracing a new policy framework to address sustainability issues. He said his government aims at accelerating sustainable trade through a “carrot and stick” approach, diversifying the economy, and advanced technology adoption.
Mr Sultan Ahmed Bin Sulayem, World Chairman of DP, a multinational logistics company, emphasized the importance of government-private sector collaboration on trade facilitation, technology and renewable energy in ports. He stressed the need for a standardized system across countries to facilitate trade and reduce delays, citing Africa’s low inter-country trade percentage compared to developed countries.
Mr John Denton, ICC Secretary General, shared his perspective on how global companies can adapt to renewable policies and reduce their overall footprint on a nation-by-nation basis, with a focus on environmental, social and governance (ESG) issues, which are increasingly important for businesses worldwide. He also pointed out the importance of addressing carbon leakage and ensuring that carbon border mechanisms (CBMs) avoid WTO non-compliant outcomes.
Dr Rebeca Grynspan, UNCTAD Secretary General, underlined the need for a multilateral approach to avoid the existing “spaghetti bowl” of climate and environment regulations that small and medium-sized enterprises (SMEs) and vulnerable countries cannot navigate. She called on leveraging the opportunity climate change and energy transition provide to ensure that developing countries will be in a position to add more value into their participation in global trade.
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