The group of World Trade Organization (WTO) members undertaking “structured discussions on trade and environmental sustainability” (TESSD) is moving ahead on its efforts to determine what its work may cover and how – including what they could include in a ministerial statement ahead of the Organization’s highest-level meeting in December.

Their 26-28 May gathering was their second meeting in 2021, with participating members organizing their discussions around a set of topics. These covered environmental goods and services, “greening” Aid for Trade, fossil fuel subsidy reform, border carbon adjustments, and “green” trade.

Going into the meeting, the TESSD coordinators circulated a workplan in early May to help structure the work in the lead-up to the WTO’s Twelfth Ministerial Conference (MC12), which is now only six months away. The event is set for 30 November – 3 December 2021, in Geneva, Switzerland.

That workplan, according to a version seen by the SDG Knowledge Hub, refers to the objective of having a ministerial statement in time for MC12, one which would stress both the importance of dedicated work on trade and environment issues and set out the road ahead after the December ministerial concludes. Its document number is INF/TE/SSD/W/11, though access is currently restricted.

Participating members also noted that there is a wealth of activity underway on trade and environment issues across the WTO membership, including initiatives on plastic pollution and fossil fuel subsidy reform, and that these efforts should be treated as “complementary” and that the work should be “coherent” – without being prescriptive over who should support which initiative.

As with the March meeting of the TESSD, a few select institutions were invited to make interventions at the 26-28 May discussions, including representatives from think tanks, intergovernmental bodies, business associations, and civil society groups. They were invited to participate during the first two days, with the final day open to WTO members only. Participation of external stakeholders remains on an invitation-only basis, and whether the modalities of their participation will remain the same or may be updated as the TESSD evolves is still under discussion.

Environmental goods and services

In their submissions earlier this year on priority items for the TESSD, several participating WTO members had referred to the liberalization of environmental goods and services – along with related topics such as non-tariff barriers and trade facilitation – as an area of interest.

The 26-28 May session dealt with this topic more at length, looking at the ongoing efforts among the Asia-Pacific Economic Cooperation (APEC) economies to update their own list of 54 environmental goods whose tariffs were cut to 5% or less. Participants also considered the lessons that could be learned from the Environmental Goods Agreement (EGA) negotiations, a tariff-cutting initiative by a subset of the WTO’s membership that stalled in late 2016.

The presenters invited to the May session of the TESSD referred to the benefits of using a bottom-up approach in determining which environmental goods could be included, and from there assessing the environmental benefits and likelihood of consensus – rather than imposing a top-down definition of what an environmental good might entail.

Participating members also considered options for addressing some of the sticking points that had emerged under the EGA talks, such as how to deal with so-called “dual use” products, those that have both environmental and non-environmental uses.

Participants also expressed extensive interest in reinvigorating talks on environmental services, along with questions on where is the best avenue for this work. Negotiations on environmental services have traditionally taken place under the Council for Trade in Services in Special Session (CTS-SS), and have looked at the scope and definition of that term, especially given the limited commitments that WTO members have currently in their schedules for that type of services.

The TESSD looked at the history of the talks so far, along with more recent developments, such as the submissions by Australia, Canada, Mexico, New Zealand, Switzerland, and the UK in the CTS-SS to explore a wider scope for the term environmental services. Those submissions are under document numbers JOB/SERV/293/Rev.1 and JOB/SERV/299/Rev.1, though access to both is restricted to WTO members only on the Documents Online portal. They also considered the challenges in dual use environmental services and how the negotiations might address them, along with whether to also address environmental technologies and other topics.

Some participating TESSD members suggested that environmental goods negotiations be resumed at MC12, along with negotiations on environmental services, with the next ministerial conference (MC13) being the target date for reaching a deal. Other ways that the WTO could contribute to members’ efforts at carbon neutrality were also discussed, including a recent submission from Japan (INF/TE/SSD/W/10) on the subject.

Other presentations highlighted initiatives on environmental goods and services that are taking place across several other forums, including the negotiations among Costa Rica, Fiji, Iceland, New Zealand, Norway, and Switzerland for an Agreement on Climate Change, Trade, and Sustainability (ACCTS). They are currently working to whittle down a list of approximately 500 products that could be included in a final environmental goods list, along with developing binding commitments on environmental services.

“Greening” Aid for Trade

The WTO’s current Aid for Trade work programme runs through 2022 and has as its theme “Empowering Connected, Sustainable Trade.” In March this year, WTO members held a stocktaking exercise that considered the impacts of COVID-19 on trade and trade-related aid, especially for developing and least developed countries (LDCs), ahead the biennial Global Review of the initiative that is planned for 2022.

How to ensure aid for trade-related projects and programs can also support environmental objectives was the subject of another TESSD session during the 26-28 May meeting. While some speakers noted that more can be done to ensure trade-related aid projects actually achieve the environmental objectives they are linked to, others referred to the risk that environmental performance could become a condition for receiving aid, citing the difficulties that may cause for many countries, including small island developing States (SIDS) that are vulnerable to crises.

Participants also looked at how their discussions on linking environmental objectives to trade-related aid projects could inform the contours of the next Aid for Trade Global Review. Some suggested that technology and innovation be featured more prominently in that process. The value of having a space to share experiences and best practices, including on linking Aid for Trade projects to more targets under the SDGs, was also listed as a priority by some participants.

Fossil fuel subsidy reform

The TESSD also examined the long-standing question over whether WTO disciplines can be improved – or new ones developed – to support efforts at fossil fuel subsidy reform. The discussion focused mainly on the impacts of these types of subsidies on traded goods, along with trends in subsidy levels.

Some participants saw the Organization as a place that could explore the issue in further depth and raise its profile on the public stage. They also examined whether detailed subsidy notifications and the incorporation of subsidy information in WTO members’ Trade Policy Reviews could be a promising and valuable place to start. In a similar vein, they also referred to APEC, the Organisation for Economic Co-operation and Development (OECD), the International Energy Agency (IEA), and IISD’s Global Subsidies Initiative as strong examples of the growing body of data that is being consolidated around the levels and types of fossil fuel subsidies in place.

TESSD participants also heard how some regional trade agreements have found ways to address other environmentally harmful subsidies – such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership’s (CPTPP) language on fisheries subsidies – and the ACCTS’ section on fossil fuel subsidies. Some suggested that there are other subsidies also worthy of the WTO’s attention.

Border carbon adjustments

The European Commission is due to propose a carbon border adjustment mechanism (CBAM) as part of its Green New Deal in July, and Canada is undertaking its own consultations over the coming months over whether to do the same. Given that context, whether the TESSD and the WTO could be forums for discussing the trade-related implications, principles, and best practices related to border carbon adjustments was another key agenda item during the May TESSD meetings.

Along with reviewing where the discussion could take place and what it might cover, TESSD participants also looked at the main objectives these mechanisms should address, namely, carbon leakage and varying levels of climate ambition across countries.

They also looked at the question of common but differentiated responsibilities and respective capabilities (CBDR-RC), the principle under the UNFCCC climate talks that acknowledges the varying contributions countries have made in exacerbating climate change – and the range of abilities that countries have to respond to it and adapt their economic structures accordingly. TESSD participants also noted the ongoing question of whether border carbon adjustment mechanisms can be designed in line with WTO rules, and if so how, and the need for transparency and further discussion on the subject.

Green trade: circular economy in the spotlight

The red thread across the session on greening trade was the concept of “circular economy,” including national examples from countries such as Chile that have introduced legislation on producer responsibility across a range of economic sectors and have curtailed the use of plastic bags and other single-use plastics.

The opportunities for WTO members to cooperate further on the circular economy – such as by notifying measures related to recycling and remanufacturing, along with what these measures mean for trade costs – was another issue raised at the TESSD May meetings.

Participants reviewed some of the benefits and challenges developing countries experience in the circular economy transition, and the need to ensure that LDCs in particular are aware of what is under consideration at the TESSD.

Aside from the circular economy, other presentations addressed the impediments that non-tariff barriers pose in the transition to “greener” approaches to trade, especially for developing countries trying to adapt to new sanitary and phytosanitary (SPS) measures or other measures that implicate how supply chains function.

Coming up

An initial outline of what the ministerial statement could entail should be ready by late June, according to trade sources familiar with the talks. WTO members participating in the TESSD will then have the month of July to begin discussing it with stakeholders.

Participating WTO members may convene before the August break to take stock of their efforts, and the workplan circulated in early May foresees another TESSD meeting from 16-17 September to review the preparations for the ministerial statement. According to trade sources, another meeting could take place in early November to put the finishing touches on that document.

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By Sofía Baliño, Communications and Editorial Manager, Economic Law and Policy, IISD