Bridges Weekly Trade News Digest • Volume 13 • Number 30 • 9th September 2009

Trade Issues Come to the Fore in Climate Talks

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Questions about how a global climate deal might impact the world economy - and specifically cross-border trade - got a new emphasis at informal, high-level climate talks in Bonn, Germany last month.
Officials met from 10-14 August in an effort to inject momentum into the climate talks, which are quickly approaching a major deadline: in just three months’ time, climate negotiators from around the world will gather in Copenhagen to negotiate a potential successor pact to the Kyoto Protocol.

Discussions at the five-day meeting were divided into a number of subject-specific meetings, each of which was led by an appointed facilitator whose role was to manage, but not guide, discussions. The trade implications of climate change arose implicitly in some groups and explicitly in a number of others - including in the talks on mitigation, technology transfer, and even on countries’ ‘shared vision’ of climate change goals.

But while some trade issues got a boost in popularity at the talks, the overall pace of the negotiations was slow. Yvo de Boer, chairman of the UN Framework Convention on Climate Change, seemed frustrated at the pace. “We seem to be afloat on a sea of brackets,” he said, referring to the punctuation marks used in the draft text to signal points on which negotiators have failed to find agreement. “The speed of the negotiations must be considerably accelerated at the [next] meeting in Bangkok,” he added, according to a report from Greenwire.

North-South divide apparent in mitigation discussions

The discussions on the ‘economic and social consequences of response measures’ to climate change saw heated debate on trade-related issues. The talks took a surprising turn when India proposed that the following language be inserted in the negotiating text:

“Developed country Parties shall not resort to any form of unilateral measures including countervailing border measures, against goods and services imported from developing countries on grounds of protection and stabilisation of the climate. Such measures would violate the principles and provisions of the Convention, including, in particular, those related to the principle of common but differentiated responsibilities (Article 3, paragraph 1), to trade and climate change (Article 3, paragraph 5), and to the relationship between mitigation actions of developing countries and the provision of financial resources and technology by developed country Parties (Article 4, paragraphs 3 and 7).”

The suggestion received support from dozens of developing countries but was opposed by the US, Japan, and the EU. Notably, the language referencing the UNFCCC agreement is clearly meant to cover Border Tax Adjustments - measures like the ‘carbon tariffs’ that are included the climate bill that is now working its way through the US Congress.

The group’s discussion of ‘sectoral approaches’ to reducing carbon emissions is a continuation of a debate over whether negotiators should consider setting sector-specific targets that would apply to all countries. This position is opposed by developing countries, who fear that such measures would generate significant trade conflicts and consequences, especially as it relates to competitiveness.

Instead, developing countries have suggested that negotiators work toward voluntary sectoral approaches for the implementation of Article 4, which covers financing and the development and transfer of technology. Thus, they say, funds and technology could be channelled directly to specific sectors, instead of into a general pool. Sectoral efforts by developing countries are being considered as one option for nationally appropriate mitigation actions, or NAMAs.

On guiding principles, the current text already contains the following statement:

“The implementation of cooperative sectoral approaches should not replace the national targets of developed country Parties [or lead to [new commitments for developing country Parties, [trans-national or national emissions reduction targets,]] arbitrary or unjustifiable discrimination or disguised restriction on international trade [, or the application of global uniform and equal standards for Parties]].”

A lively discussion in the subgroup covering approaches to reducing carbon emissions highlighted the keen appetite for a global carbon market among many developed countries, especially in Europe. Such a cap-and-trade system would have immediate impacts on global commerce insofar as the creation of an enormous market would have a profound effect on the commodities and activities upon which it is based. Some observers say the carbon market could generate trillions of dollars and possibly surpass the global real estate market.

Technology development and transfer - much ado about IPRs

The current negotiating text has nearly two full pages on issues relating to intellectual property rights (IPRs), a fact that has led many countries to call for a focused discussion on this issue in particular. The US initially stated in plenary that they considered IPRs to be a critical part of the discussions and wished to explore the issue further. But later, when intervening in the technology discussion group, officials from Washington said the US would not accept a text that in any way hindered or otherwise affected other IPR agreements. Nevertheless, a number of developing countries continue to raise the issue, in particular as it relates to compulsory licensing and patenting. The question of IPRs will certainly stay in the debate.

Moving forward on the shared vision

The discussions on developing a ‘shared vision’ for climate change goals also sparked debate on trade issues. A number of developing countries asserted that such a statement should respect countries’ right to development and show an acceptance of an open economic system.

While the issue of agriculture did not get special treatment at the Bonn meeting, there were many reports that a small group of like-minded countries may be planning a side meeting - possibly during the next round of informal climate talks, to be held in Bangkok beginning 28 September - on agricultural issues.

Discussions on financing went more swiftly than in other groups. Notably, outside the negotiation forum, the G20 members present met to discuss the upcoming heads of state meeting, scheduled for later this month, and its focus on climate financing. A number of countries were surprised by the sideline gathering of representatives of major economies, and expressed concern about what this grouping dynamic might mean for the negotiations.

In an interview following the negotiations, UNFCCC Chair de Boer laid out “four essential” questions he hoped Copenhagen would be able to answer: the emissions cuts industrialised countries would be willing to commit to, the actions major developed countries would be willing to take, the sources of financing to support necessary financing and technology transfer in developing countries, and the means for managing that financing.

These questions will certainly receive attention in Copenhagen, but striking a balance among the widely varying national circumstances and interests will require delicate negotiating. It is not simply so much what developed countries will do as how they will do it. The financing sources and management questions are political ones that are not limited to ‘where’ and ‘how’, but need to be accompanied by a ‘how much’. The financing issues will only be resolved through demonstrated actions by developed countries on their own mitigation, and through the delivery of past commitments on technology and financial support.

ICTSD reporting; “Gloomy negotiators end Bonn climate talks,” GREENWIRE, 14 August 2009.