At a Climate Week NYC panel discussion hosted by the Yale School of the Environment, Professor Daniel Esty and a group of international experts offered insights on how the global trade system can be restructured to combat climate change and deliver a sustainable future.
A re-imagined international trade system is one of our best opportunities to realize robust climate change action on a global scale and move toward a sustainable future. That was the top takeaway from the Remaking Global Trade for a Sustainable Future panel discussion hosted by the Yale School of the Environment during Climate Week NYC.
Held at the Yale Club on September 20, the discussion opened with presentations by two of the co-leads of the Remaking Global Trade for a Sustainable Future Project including Dan Esty, Hillhouse Professor of Environmental Law and Policy and director of the Yale Center for Environmental Law and Policy and Jan Yves Remy, director of the Shridath Ramphal Centre of International Trade Law and Policy at the University of the West Indies. Commentary was provided by two sustainability thought leaders who have been involved in the Project: Kerrlene Wills, director for Oceans and Climate at the United Nations Foundation, and Yuvan Beejadhur, senior advisor to WTO Director-General Ngozi Okonjo-Iweala.
“Since early in the 21st century, the global trade system has been seen as delivering on what big business and multinational corporations needed — and not what all of us needed,” Esty said, noting that the theory that global trade could be a critical point of leverage for a sustainable future was what motivated him to accept Dr. Ngozi’s invitation to take a public service leave from Yale to help the WTO team think through the elements of a WTO sustainability reform agenda.
“What Dr. Ngozi has stressed during her time as the WTO director general is that we need a people-centered trade system, and that is very much what we're trying to advance with this Remaking Global Trade Project,” he said. “It needs to be, as Dr. Ngozi would tell us if she were here, more inclusive, more transparent, more digital and modern, and, fundamentally, more sustainable.”
At WTO’s Public Forum in Geneva last week, the Remaking Global Trade Project, which is a joint initiative of the Yale Center for Environmental Law and Policy, Tufts’ Fletcher School of Law and Diplomacy, and the University of the West Indies, released its reform agenda, or roadmap, to restructure international trade to drive global progress on climate change and sustainability. Known as the Villars Framework for a Sustainable Trade System, the agenda was refined at the High-Level Summit Meeting for a Sustainable Trade System, held Sept. 15-17 in Villars (Switzerland), which brought together more than 100 officials from trade ministries, environment and climate change agencies, environmental NGOs, academic policy centers, think tanks, and business.
Double Bad Box
Remy, co-leader and policy director of the Project, described the 10 workshops held at diverse locations around the world from which the reform agenda emerged.
“We looked at Indigenous communities, at women and trade, at workers and labor and trade. We also looked at the digital revolution and its intersection in trade, the just transition and the development focus of many small developing countries, and bigger developing countries as well,” she said. “What you see here is really that attempt to bring people on board thinking about how trade must be more responsive to the needs of the new economy.”
Among the points Remy said she took away from the Project and the Villars Framework was that the global trade system has to be more ambitious in terms of its outlook and where it wants to go. It cannot, however, be ignorant of the systems through which it has been operating for the past 40 to 50 years.
“The WTO has really had only one question in mind for all its history when there's a subsidy in question— is it trade distorting?” Remy said. “Our argument is that is the wrong question to start with, and it's not the only question. The first question should be is the government support sustainability enhancing or sustainability diminishing.”
She noted that under the old way of thinking, if a subsidy was sustainably harmful, but not trade disruptive, the WTO would say that it was not their business. “We argue, sorry, not good enough, if sustainable development is your mandate, you should be against that subsidy,” Remy said. “And, by the way, what about the ones … that are trade disruptive and environmentally or sustainability harmful, what I call the double bad box.”
Subsidies in the “double bad box” should be phased out gradually, she argued, on a tiered schedule based on a country’s stage of economic development, such as a five-year schedule for the developed world, and 6 to 12-year schedules for countries in the developing world.
All of this reform must be undertaken with a special focus on a just transition observed Remy. “In the trade world, we talk about equity in term of special and differentiated treatment for developing nations, but increasingly we're using the climate change concept of common but differentiated responsibilities,” Remy said. “It is an understanding that each country has different roles to play in terms of environment degradation, but also that they have different capacities to deal with that and to respond.”
There are several steps the WTO can take to ensure that emerging sustainability standards are established in an inclusive manner, she added, including creating carbon markets in which developing countries can participate.
“How do we think about carbon markets where developing countries can actually participate in credits for the types of carbon sequestration that is natural to us because we're large ocean states, or we have forested regions, and how do we use that in order to pay for some of the mitigation and adaptation policies?” she asked.
Ocean Acidification and the Negotiators’ Next Steps
Kerrlene Wills, director for Oceans and Climate at the United Nations Foundation, referenced her previous experience as the former acting head of mission and trade negotiator for the government of Guyana at the WTO's 12th Ministerial Conference (MC12) in 2022 to illustrate how it is possible to make progress even in the face of reluctance or resistance.
As a trade negotiator one’s initial response is to be risk averse and protect your national interest, she explained.
“I understand very well being a traditionalist for trade and wanting to have the system remain as is,” Wills said, noting that the problem is that the international trade system is not functioning for the modern day. “It doesn't take into account the rise of new economies. It doesn't take into account the rise of new challenges that we face today in climate, and that those things do need to be addressed.”
Wills said that going into MC13, some of the recommendations made in the Villars Framework would be critical, and members are reinvigorated to try something new. She also noted that in thinking about subsidy reform there were a lot of questions to be answered.
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“Are we going to focus on the environmental impacts of fossil fuel subsidies, for example? Do we have to have a WTO negotiation on the prohibition of subsidies to fossil fuel?” she asked. “Are we creating what is the next step of negotiating that we will do in this new era of the WTO on the intersections of climate?”
Yuvan Beejadhur, senior advisor to WTO Director-General Ngozi Okonjo-Iweala, also emphasized the need for inclusivity in the international trade system, noting that for Dr. Ngozi trade is about people, but it is also about the planet and biodiversity loss.
A native of Mauritius, Beejadhur said that the small island nation was increasingly being impacted by ocean acidification and is at risk of losing 7% of its GDP over the next 40 years due to climate impacts.
He emphasized that there could be no effective solution to any global problem unless there was greater solidarity, more multilateral responses, and countries and companies at the margins of global trade were not forgotten.
“My point is very simple. We cannot decarbonize unless trade is really part of the system for a better world,” Beejadhur said. “But we're going to have make that happen, and that's precisely the vision of the director general, Dr. Angozi, to really reimagine globalization.”