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Interpreting Developing Countries’ Positions on Trade Issues at the Bonn Climate Talks

August 26, 2010

The International Center for Trade and Sustainable Development has a great page following the international trade aspects of international climate negotiations.

Most recently, they note the ongoing concerns that resurfaced at the Bonn Climate talks earlier this month. Apparently,

China expressed concern that these instruments [read sectoral mechanisms and possible brder tax adjustments] create the potential for trade restrictions and discrimination.  

Of course, that’s pretty rich coming from the world’s biggest currency manipulator. But interesting to know what they argue, anyway.

Meanwhile, it seems that a major block to a world carbon market is the fear developing countries have about the effects such a ton of carbon pricing might put on world commodity trade. Similar fears are apparently also behind their reluctance to embrace sectoral mechanisms for bunker fuels (for navigation and aviation) and a push to pre-empt border tax measures. Here is a longish except from last September’s pre-Copenhagen negotiations:

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.

The last phrase is a curious one. After all, the guiding principle behind both sectoral mechanisms and border tax adjustments is to equalise the carbon cost content of competing goods from different (developed and developing) countries. It’s therefore curious that developing countries would cite this as a source of anti-competitiveness. It’s meant to protect competitiveness, in particular by avoiding giving developing country industries an unfair advantage. My interpretation of their position – an initial hypothesis – is therefore that developing countries think it creates conflict to force them to compete on a level playing field (A funny definition of ‘competitiveness conflicts!’). Perhaps this is founded on a prefered interpretation of common but differentiated responsibility. Specifically, on an awareness of the fact that their production processes tend in fact more emissions intensive for similar goods than developed country ones. Thus, they see their right to avoid leveling up carbon costs as part and parcel of common but differentiated responsbilities and the duties of deeveloped countries to provide technology transfer. Indeed, the ICTSD report goes on to say:

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]].”

It seems, alas, that little has changed since pre-Copenhagen on this front. Although, ICTSD also report that some experts think that institutions to manage mitigation finance, adaptation and technology transfer may be shaping as one of the key successes of the Cancun negotiations. Let’s hope for that, at least.

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