Navigating the trade and environment nexus: A call for actionable equitable policies

Economics Times, January 01, 2024

By Pradeep S Mehta and Swati Sharma

As the global community grapples with climate change, plastic waste, biodiversity loss, and pollution, the need for a balanced approach that fosters sustainable development, meaning the triumvirate of economy, equity, and ecology, is more crucial than ever.

In the complex web of international trade policies, the intersection with environmental and other considerations has become a pressing concern, particularly for the developing and emerging world. As the global community grapples with climate change, plastic waste, biodiversity loss, and pollution, the need for a balanced approach that fosters sustainable development, meaning the triumvirate of economy, equity, and ecology, is more crucial than ever.

Challenges Faced by the Developing World
For example, navigating the intricate intersection of trade and ecological concerns poses a myriad of challenges to the Global South. With limited capacities, competing priorities, and the relentless pursuit of economic development, striking a delicate balance becomes an intricate tango. The recent influx of new measures, exemplified by the Carbon Border Adjustment Mechanism (CBAM) championed by developed nations like the European Union, underscores the pressing demand for developing countries to harmonise their policies with environmental imperatives.

Adding complexity to this challenge is the undeniable reality that the developed world not only operates but increasingly shifts its polluting industries to less developed, labour-intensive countries. This trend poses additional hurdles for developing nations committed to reducing their carbon footprint, particularly as they actively attract these industries to boost foreign direct investment (FDI). Furthermore, it benefits the firms in the rich world who can reduce their environmental burden and thus not attract violation of CBAM measures. The intertwined dynamics of industrial relocation and FDI attraction create a multifaceted scenario, necessitating comprehensive strategies to navigate the intricate web of environmental concerns, economic dependencies, and the pursuit of sustainable development.

Furthermore, the Global South nations frequently find themselves ensnared in the conundrum of advancing economic growth to alleviate poverty through trade liberalisation while simultaneously grappling with non-trade issues. The apparent trade-offs between the two objectives create a formidable dilemma, especially when social and environmental regulations are perceived as potential impediments to economic progress. Furthermore, despite prolonged deliberations, international efforts often appear more as lip sympathy rather than actual and substantive help. Consequently, the Global South faces formidable obstacles in converting lofty ideals into tangible and meaningful advantages.

The Current State: Lip Service or Action?
The intersection of trade and the environment stands as a recurring focal point in international forums, where assurances of equitable treatment and a recognition of the developmental hurdles faced by emerging economies echo through the discourse.

Global South passionately advocates for fair representation and substantive involvement in shaping trade and environmental policies. However, the intricate power dynamics that characterise international negotiations persistently tip the scales against them.

Within the World Trade Organisation (WTO) regime, the principles of Special and Differential Treatment (SDT) strive to embed a developmental perspective. Similarly, Multilateral Environmental Agreements (MEAs) hinge on the concept of Common But Differentiated Responsibilities and Respective Capabilities (CBDR-RC) to underscore the unique challenges faced by developing nations. This principle is vital in addressing the imbalance between the rich and the poor of the world. Nevertheless, the assurance of support and consideration often falters when it comes to translating these principles into actionable policies.

The persistent calls from developing nations for extended transition periods and a steadfast commitment to principles like CBDR-RC within trade-environment discussions articulate a plea for fairness and equity. Regrettably, the outcomes on the ground remain inconclusive. Despite years of dialogue, the developmental concerns of the Global South continue to be overshadowed by the relentless pursuit of selfish economic interests by the Global North.

Moreover, in the intricate dance between promises made on the global stage and the lived experiences of nations striving for development, a disconcerting gap persists. Bridging this divide necessitates a concerted effort to move beyond rhetoric, translating noble principles into tangible actions that genuinely prioritise the developmental challenges faced by emerging economies. Until this transformation occurs, the nexus between trade and the environment and other non-trade issues will remain fraught with unfulfilled promises and unmet expectations.

Towards Equitable Policies: From Rhetoric to Action
Addressing the intricate challenges faced by the developing world requires a careful negotiation of the complex interplay between development and environmental debate. This goes beyond a mere understanding of the trade-environment dynamic and extends to the formulation of fair and equitable trade policies, ensuring sufficient policy flexibility for developing and least-developed nations.

For equitable trade policies to move beyond rhetoric, several key aspects must be addressed:

Concrete Implementation of SDT: Special and Differential Treatment must transition from a theoretical concept to a practical reality. Policymakers in developing nations, in addressing challenges posed by polluting industries, need to proactively adopt a strategic approach. Emphasizing the necessity for prioritizing special and differential treatment is crucial, especially in discussions about CBAM and its applicability to developing countries. This prioritisation should involve incorporating distinct standards and timelines tailored to developmental needs. The crux of the matter lies in actively implementing differential treatment, enabling developing nations to adeptly balance the imperative of attracting Foreign Direct Investment (FDI) with the overarching goal of promoting environmental sustainability.

Improved technical assistance: Developing nations need not just promise but tangible support mechanisms that acknowledge their developmental challenges. For instance, transfer of technology on reasonable terms and though briefer, developing and least-developed nations to have a two-year transition period under the Agreement on Fisheries Subsidies. While it supports development goals, the absence of active technical assistance may hinder achieving them.

Revitalising Trade and Environment Negotiations: The Doha Development Agenda (DDA) set the stage for trade and environment negotiations, but progress has been slow. There is an urgent need to breathe new life into these discussions, with a focus on real outcomes that align with the principles of sustainable development.

Alignment with Climate Change Initiatives: The nexus between trade and climate change is undeniable. Efforts must be made to bridge the gap between the WTO and the United Nations Framework Convention on Climate Change (UNFCCC), fostering collaboration and information exchange.

Triple-Win Solutions: Identifying issues that offer simultaneous economic, social, and environmental progress is pivotal. The pursuit of policies that benefit all aspects of development is essential for sustainable growth.

Enhancing “Aid-for-Trade”: Greening the “Aid-for-Trade” initiative is a step towards aligning developmental needs with environmental goals. The focus should be on providing support that aids in capacity building and sustainable development outcomes.

Demand-Driven Capacity Building: Developing nations need targeted capacity-building initiatives that address their specific challenges. This may vary from geography to geography and requires not just financial resources but a sincere commitment to inclusive advancement in areas critical to their development.

Breaking the Deadlock: Moving Beyond Impasse
The existing deadlock in global efforts to create equitable trade policies demands a reassessment of prevailing strategies. Closing the enduring divide between commitments and actual implementation is essential for substantial transformation. It is imperative to recognise that the dilemmas encountered by the Global South in reconciling trade and environmental and other non-trade concerns, and considerations are not isolated problems but integral components of the broader global development agenda. As governments proceed with trade and environment discussions in the upcoming year, four key recommendations are put forth for their consideration:

First, Enhanced Participation in Negotiations: Developing countries should actively engage in trade and environment talks, ensuring strategic measures for enhancement. Advocate inclusive participation in WTO negotiations, establish dedicated working groups, and strengthen South-South cooperation for collective bargaining power.

Second, Reinforcing Developmental Frameworks: Utilise frameworks like SDT and CBDR-RC to support a developmental perspective. Integrate flexibility mechanisms in trade agreements with differentiated timelines, commitments, and frameworks for temporary exemptions, aligning trade policies with environmental and other goals. Ensure transfer of technology on reasonable terms to enable green production by incentivising the IPR holders in the rich world.

Third, Tackling Non-Tariff Barriers: Address non-tariff barriers through concerted efforts. Advocate within WTO for elimination or reduction, implement transparent guidelines for assessment, and resolve non-tariff barriers to ensure fair access and promote environmentally sustainable trade practices.

Fourth, Checking of Polluting Industries Shifting to Global South: To keep a track of polluting industries which are shifting from rich countries to poor countries and assess their impact on the host countries for being used in bargains for concessions under SDT.

The authors work for CUTS International, a global public policy research and advocacy group.

This Article can also be viewed at: