Date: 02/11/2009
Source: World Trade Organisation
Title: WTO: Lamy: Keynote address by the WTO DG at Carleton University on
trade and climate change, Ottawa

Ladies and gentlemen,

In 2007, I attended the Trade Ministers' meeting in Bali on the relationship
between trade and climate change. In Bali, I sent a simple message: climate
first, and trade second. And that message still stands today. It was, and
continues to be, a message that is designed to uphold the Copenhagen Climate
Summit at the end of this year.

Ladies and gentlemen, the climate crisis that we are witnessing today is the
single biggest challenge to civilization as we know it. Responding to that
crisis is urgent, and is a top priority on the international agenda. Because
that crisis is so serious, responding to it requires that we unleash all our
resourcefulness and creativity.

While the multilateral trading system has a key role to play on the
international economic and political landscape, that trading system is
designed to enhance, and not reduce, human welfare. It cannot stand as a
barrier to the fight against climate change - in particular, to the
conclusion of a "global" environmental accord.

My message in Bali, therefore, was that climate negotiators needed to
conclude an international treaty from which the WTO would take its cue. To
truly enhance human welfare, the trading system needs to respond to the
signals that would be sent to it by a successful Copenhagen accord. A
trading system that ignores the emerging carbon price - that ignores the
damage to our planet that greenhouse gas emissions cause - would reduce our
welfare. No wonder then that the creators of the WTO enshrined the concept
of Sustainable Development, right in the Preamble of the WTO accord.

Now, I must confess to you, that back in Bali, my message was greeted with a
sense of relief by the environmental community. Many environmentalists had
anticipated a heavy-handed WTO - a "GATTzilla" as we were once called. One
that would step into the climate debate clumsily to impose its "trade-will"
on the whole. Instead, they found a compliant WTO. One that was willing to
greet with open arms a new international climate accord.

But I must explain to you why this position was as necessary for the WTO
back then as it is now. And, this, despite the fact that, since Bali,
various academics and government officials have informally knocked on my
door to ask that I revisit that message. Why do they wish to see this
message revisited, you may very well ask. Because, they say, in some
quarters, unilateral legislation is being crafted, to fight climate change,
that may include trade measures. And those who see themselves as the targets
of these measures would like the WTO to reign them in. While those who are
themselves crafting these measures would like the WTO to bless them.

My response to them has been as follows. First, that it is important to
distinguish between the climate mitigation measures that exist today, and
those that are still being contemplated. Within the cap-and-trade schemes
some have either already introduced, or may introduce in future, various
flexibilities to reduce the compliance pain for their industries. The free
allocation of pollution permits is one such example, and could be
WTO-related.

Others are contemplating "border adjustments", of various sorts, for the
future. These measures may take the form of a requirement upon importers to
purchase pollution permits at the border, or of carbon tax, to encourage
exporters to account for their emissions. Options of this nature are
embodied in European climate directives, and in some of the bills currently
being contemplated in the US. With the Waxman-Markey and Boxer-Kerry bills
being the most recent.

These "border measures" stem from the philosophy that since the Copenhagen
Summit may fail, the "first-movers" on climate change must themselves take
action to "level the carbon playing field". They must offset the competitive
disadvantage that their industry may suffer from enduring the costs of
climate mitigation.

Intertwined with the competitiveness argument, which is the dominant
argument in most political discourse, is the fear of "carbon leakage". The
fear that carbon emissions will simply shift from the part of our planet
that will take commitments to the part that will not, thereby negating the
environmental benefits.

Clearly, therefore, some countries are hedging their bets against the
failure of a Copenhagen accord. But should this hedging of bets translate
into a "trade first, climate second" solution - as some of my visitors have
suggested? I would say no.

Ladies and gentlemen, there is no better way to offset a competitive
disadvantage, or to fight carbon leakage, than an international accord that
includes as many players as possible. Will a simple tax at the border here,
or a simple requirement to purchase pollution permits there, level the
carbon playing field? If taxes and permits could do the job, I can assure
you, the world would have never embarked on the long road to Copenhagen!

It is precisely because no form of unilateral action can solve climate
change - it is because no form of unilateral action can fully address the
competitiveness problem - that we need to bring everyone onboard. This
should reinforce the call for a Copenhagen accord.

But some have also come up to me in recent days to suggest that the WTO
needs a climate-specific "subsidies code". With their principal concern
being, of course, the free allocation of pollution permits. My response has
been to say: tell me exactly where you think that the shortfall lies in
current rules. Ladies and gentlemen, these issues need to be responded to
with clarity, before we send negotiators from 153 members down a negotiating
trail.

And let us be under no illusion. If there is no accord in Copenhagen or soon
afterwards, an accord in the WTO on the trade measures that may be used to
fight climate change will be extremely difficult to reach. Why? Because many
would resist that trade be used as the international bargaining tool, and
the source of leverage, that would define the contours of the climate
debate.

This takes me to my next message: the relationship between trade and climate
change must not exclusively be viewed through a negative prism, there is
tremendous scope for complementarity between a climate agenda and trade
agenda.

First, let us all recall that the WTO has an environmental negotiation
taking place as we speak. Part of the Doha Round of trade negotiations
includes a chapter to accelerate market opening for environmentally friendly
goods and services. Many climate-friendly goods and services are being
penalized upon importation, rather than encouraged, and this is a situation
that we must change.

But there is further scope for complementarity between a climate and a trade
agenda. The International Energy Agency has highlighted many trade barriers
that stand in the way of the Clean Development Mechanism. They include clean
technologies that get stuck at the border, and which do not reach CDM
projects on time, either because of tariffs, non-tariff barriers, or
cumbersome customs procedures.

Let us join hands in addressing these barriers at the WTO. All the CDM
issues that I have mentioned are addressable through existing WTO rules and
the current Doha mandate.

Allow me to also mention that the WTO has recently issued a joint report
with the United Nations Environment Programme on the relationship between
trade and climate change. The report is intended to show the many linkages
that there can be between a trade and a climate agenda. While the press
seized on the border tax portion of the report, since it is the "sexiest" of
the linkages, such taxes were hardly the core. I would encourage you to
appraise yourselves of this report.

Ladies and gentlemen, some final thoughts before I close. Climate
policy-makers tell me that the world has never been closer to a global deal.
Today, both developed and developing countries alike want to tackle climate
change. It is the details of how they do so that remain to be closed.

The climate negotiation has my full support. Part of that support will
continue to manifest itself in not reducing the climate agenda to one on
trade.

Plan A is a world in which clear climate commitments are assigned to all -
under common but differentiated responsibilities - and where the WTO toolbox
is only explored at the implementation stage.

Plan B is a unilateral, go-it-alone approach to climate change, that
mistakenly places the implementation toolbox at centre stage. We must fight
for the only real plan that we have, which is Plan A.

Thank you for your attention.