
The Trade Dimension of Rio+20...
Key Issues for the Outcome Document
UN, New York, 16 March 2012
Morning Session:
Minimizing barriers to trade in a green economy
Module 1:
Green economy policies with trade impacts
Time: 40 mins + 20 mins discussion
Presented by Robert Hamwey
The Trade Dimension of Rio+20...  Green economy polices & trade
This module
to review and discuss…
• Trade ↔ environment policy interface.
• Most green economy policies will affect trade.
– Specific examples.
• Possible elements for the Outcome Document.
The Trade Dimension of Rio+20...  Green economy polices & trade
Green Economy Policies
• National policies needed :
– stimulate change in production and consumption patterns.
– promote technology development and innovation.
• Aim to reduce environmental damage, lower carbon
intensity of development, preserve ecosystems, improve
public welfare and reduce poverty.
• Key approach is to place a cost on natural and
environmental resources to influence economic
decisionmaking.
• Private sector and civil society also active players in
promoting change through awareness raising campaigns
and voluntary initiatives.
The Trade Dimension of Rio+20...  Green economy polices & trade
Green Economy Policies
Targeting
production
Competition
Environment
National
Policies
World
Market Access
Targeting
consumption
The Trade Dimension of Rio+20...  Green economy polices & trade
Green Economy Policies and Trade
• If countries did not trade goods and services we would
not have an issue to be concerned with.
• But countries do trade ! Trade is responsible for a large
portion of their economic income.
– 1/5 of developed countries’ income
– 1/3 of developing countries income
• Adverse changes in trade (exports) is a major concern
for all countries.
• Countries seek assurances that a green economy will
improve their prospects for trade, or at least leave them
unchanged.
The Trade Dimension of Rio+20...  Green economy polices & trade
Origins of Green Economy Policies
Public demand
Policies and measures:
Regulations, Standards, Bans, Fees, Charges,
Subsidies, Public procurement,
Tax rebates, etc.
Effect on trade ???
The Trade Dimension of Rio+20...  Green economy polices & trade
Origins of Green Economy Policies
MEAs
Rio+20?
Policies and measures:
Regulations, Standards, Bans, Fees, Charges,
Subsidies, Public procurement,
Tax rebates, etc.
Effect on trade with other
non-parties
parties???
???
The Trade Dimension of Rio+20...  Green economy polices & trade
National Green Economy policies
Types of national measures available to governments,
i.e., Command & Control and Economic Instruments
– Command & Control
Regulation, standards, bans
– Economic Instruments
Charges, fees, taxes
– Economic Instruments
Subsidies, tax rebates,
government procurement, etc.
$
$
The Trade Dimension of Rio+20...  Green economy polices & trade
National Green Economy policies
Types of national measures available to governments,
i.e., Command & Control and Economic Instruments
– Voluntary agreements
e.g., domestic firms agree with
government to reduce pollution,
use renewable energies…
– Information Instruments
Awareness campaigns,
ecolabels
The Trade Dimension of Rio+20...  Green economy polices & trade
Why is trade affected?
• National product regulations/standards may be
difficult/costly for foreign firms to meet (i.e., developing
country firms).
• By changing the cost structure of production, national
policies alter the relative competitiveness of national and
foreign firms.
• National environmental measures can be used as a guise
for closing off national markets (green protectionism).
• Greening of supply chains.
• Ecolabels influence consumer demand.
The Trade Dimension of Rio+20...  Green economy polices & trade
Country
A and
B implement similar GE regulations, standards.
Trade
Impacts…
Relevance
to Rio+20:
Their exports to each other increase.
– Command
& Controlcountry, it may require international support
If country
C is a developing
(e.g.,
financial
technical
assistance,
technology transfer) to increase
Regulation,
standards,
bans
Country
C doesand
not
implement
new GE regulations/standards.
productive
capacity
so itnew
can GE
meet
new GE regulations/standards.
Its
firms unable
to meet
regulations/standards
of A and B. Warning light for
National
regulations/standards
Its
exports
to A and B decrease. that relate to PPMs.
Before
Policy
After Policy
(regulation/standard)
A
Exports (B)
B
Exports (C)
C
The Trade Dimension of Rio+20...  Green economy polices & trade
Trade Impacts…
Relevance
to
Country
A implements
PPM-based regulations, standards, banning imports of non– Command
& Rio+20:
Control
compatible
Country
B andthat
C do
Exportsgreen
from Bprotectionism.
and C fall to zero.
Countries
B‘like’
and goods.
C are likely
tobans
claim
A isnot.
practicing
Regulation,
standards,
A’s
entire
market
supplied
by domestic
producers. can resolve differences.
Likely
to lead
to trade
dispute
unless consultations
Before
Policy
After Policy
(PPM-based
regulation/standard)
Exports (B)
B
A
Exports (C)
C
The Trade Dimension of Rio+20...  Green economy polices & trade
Country
A and
B implement similar GE charges/taxes/fees. Production costs rise.
Trade
Impacts…
Relevance
to Rio+20:
Their exports decrease due to their loss of international competitiveness.
Countries
A and B
may introduce non-tariff barriers (NTBs) to offset the $
– Economic
Instruments
Country
C does
not
implement
GE charges/taxes/fees.
costs
unchanged.
competitiveness
loss
of their firms
relative to country Production
C. NTBs may
take
the form of
Charges,
fees,
taxes
Its firms become
more competitive
than thoseduties,
is A andpossibly
B.
anti-dumping
measures
and countervailing
in the form of a
Its exports
A and B increase.
“border
taxtoadjustment”.
Trade disputes can be expected to increase.
Before
Policy
After Policy
(charges/taxes/fees)
A
Exports (B)
B
Exports (C)
C
The Trade Dimension of Rio+20...  Green economy polices & trade
Trade Impacts…
Country A and B implement similar GE production subsidy policies to support firms
Relevance
Rio+20:
producing green to
good
and services. Firm production costs decline.
Their exports
due
to a gain
in international
Country
C mayincrease
introduce
non-tariff
barriers
(NTBs)$tocompetitiveness.
offset the
– Economic
Instruments
competitiveness loss of their firms relative to countries A and B. NTBs may take the
Subsidies,
rebates, GE subsidy policies. Production costs unchanged.
Country
C does tax
not implement
form
of anti-dumping
measures and countervailing duties. If C is a developing country
government
procurement,
etc.those
firms
become
less
than
A and
B. Unablegaps
to keep
with
itItsmay
take
no action
incompetitive
fear of retaliation
and is
N-S
technology
mayupwiden.
technological
progress
A and B.toExports
to A and B decrease (or fail to materialize).
Trade
disputes
can be of
expected
increase.
Before
Policy
After Policy
(production
subsidies)
A
Exports (B)
B
Exports (C)
C
The Trade Dimension of Rio+20...  Green economy polices & trade
Trade Impacts…
Country A implements GE consumption subsidy policies to support citizens’ purchase
Relevance
toservices,
Rio+20:
of green good and
but only on the condition
$ that these products are produced
– Economic Instruments
domestically.
SuchCpolicies
cantohelp
domestic
grow and
increase
their economies
Countries
B and
are
likely
claim
that A isfirms
practicing
green
protectionism.
Subsidies,
tax
rebates,
of scale.
Country
B anddispute
C see their
exports
to A declinecan
significantly
since supply now
Likely
to
lead
to
trade
unless
consultations
resolve
differences.
government
procurement,
etc. in A.
met
almost entirely
by domestic producers
Before
Policy
After Policy
(consumption
subsidies)
Exports (B)
B
A
Exports (C)
C
The Trade Dimension of Rio+20...  Green economy polices & trade
(note:
government-issued
and private-sector issued ecolabels exist)
Trade
Impacts…
Relevance
to Rio+20:
Countries A and B implement different ecolabel schemes. Consumers prefer
All
(and
consumers)
benefitbenefit
from open,
transparent
non-discriminatory
–countries
Information
Instruments
national
labels.
Domestic
producers
from increased
sales
while trade declines.
ecolabel schemes. Harmonization or mutual recognition prevent ecolabels from
i.e., Ecolabels
Country
Ctrade
does barriers.
not implement
an ecolabel
scheme.
It seeks
to apply forincertification
becoming
Developing
countries
should
be consulted
the
with ecolabels
of A and schemes
B but thistomay
prove
to be
difficult for
firms.are
formulation
of ecolabel
ensure
their
capacities
andforeign
specificies
Initially, all countries
experience
considered
in labelling
criteria. reduced exports to A and B.
Before
Policy
After Policy
(ecolabels)
worst case scenario
Exports (B)
B
A
Exports (C)
C
The Trade Dimension of Rio+20...  Green economy polices & trade
Green economy policies…
how far can we go ?
• In Module 2 we will review issues of WTO compatibility
of green economy policies.
• But let us continue on with some thoughts for reflection.
The Trade Dimension of Rio+20...  Green economy polices & trade
The world we live in…
• Dominant economic policies (e.g., trade policies)
condition the acceptability of green economy policies,
and not vice-versa.
Universe of acceptable
economic policies
Universe of acceptable
environmental policies
The Trade Dimension of Rio+20...  Green economy polices & trade
The world we live in…
• If we need to expand environmental ‘policy space’ we
first need to expand economic ‘policy space’ to
accommodate it.
Universe of acceptable
economic policies
Universe of acceptable
environmental policies
The Trade Dimension of Rio+20...  Green economy polices & trade
The world we live in…
• Where trade is concerned, expanding the universe of
acceptable economic policies necessarily requires
revising (broadening) WTO trade rules to accommodate
more proactive environmental policy actions by
members.
• WTO members might agree to negotiations on the
revision of trade rules to increase members’ flexibility in
implementing green economy policies.
The Trade Dimension of Rio+20...  Green economy polices & trade
To summarise, Rio+20 should help strengthen /
ensure coherence …
The Trade Dimension of Rio+20...  Green economy polices & trade
Specifically, to minimize trade barriers in a green
economy, Rio+20 could …
• Commit to international cooperation to assist developing countries
meet new GE market requirements.
• Caution against proliferation of NTBs in a GE.
• Caution against widening N-S ‘green’ technology gap.
• Recall the need for inclusive international consultation in
development of new GE regulations/standards and product labelling,
while promoting harmonization and mutual recognition among these.
• Call for the establishment of an intergovernmental green economy
trade forum to promote cooperative approaches to dealing with
trade tensions, and prevent trade conflicts, associated with green
policies and measures. (can help prevent green protectionism)
The Trade Dimension of Rio+20...  Green economy polices & trade
Specifically, to maximize the potential for proactive
green economy policies, Rio+20 could …
• Call upon WTO members to examine the relationship of
existing trade principles and rules and green economy
policies, and to consider the desirability of negotiations
on their revision.
The Trade Dimension of Rio+20...  Green economy polices & trade
This concludes Module 1
Module 2 will examine WTO compatibility of
green economy policies.