PRINCIPLES GUIDING THE DEVELOPMENT AND IMPLEMENTATION OF TRADE-RELATED ENVIRONMENTAL MEASURES

COMMUNICATION FROM THE AFRICAN GROUP (ANGOLA; BENIN; BOTSWANA; BURKINA FASO; BURUNDI; CABO VERDE; CAMEROON; CENTRAL AFRICAN REPUBLIC; CHAD; CONGO; CÔTE D'IVOIRE; DEMOCRATIC REPUBLIC OF CONGO; DJIBOUTI; EGYPT; ESWATINI; GABON; THE GAMBIA; GHANA; GUINEA; GUINEA-BISSAU; KENYA; LESOTHO; LIBERIA; MADAGASCAR; MALAWI; MALI; MAURITANIA; MAURITIUS; MOROCCO; MOZAMBIQUE; NAMIBIA; NIGER; NIGERIA; RWANDA; SENEGAL; SEYCHELLES; SIERRA LEONE; SOUTH AFRICA; TANZANIA;
TOGO; TUNISIA; UGANDA; ZAMBIA AND ZIMBABWE)

The following communication, dated 13 July 2023, is being circulated at the request of the African Group.

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1  INTRODUCTION

1.1.  With growing awareness of the linkage between trade and environment, the African Group (AG) notes the unrelenting efforts being made at various levels, as well as by individual countries at the World Trade Organization (WTO) to integrate trade and environment policies.

1.2.  The AG acknowledges the importance of the climate agenda, but equally acknowledges that issues on trade and environment that are currently being debated and likely to be pursued in the short-and medium-term in the Committee on Trade and Environment (CTE) could have far-reaching implications for developing countries.

1.3.  Of particular concern are the unilateral environmental measures being pursued by some countries, which are implemented with little consideration of their potential impact on developing countries and have the effect of:

(i)           undermining the multilaterally agreed mandate of nationally determined contributions (NDCs) of the countries of export,

(ii)          conflicting with and undermine the common but differentiated responsibility and equity (CBDR) principle,

(iii)         creating a preferential treatment for domestic over imported goods, restricting the market access of developing countries and least developed countries (LDCs) and creating a distortive effect on international trade,

(iv)         diminishing the prospects for development of developing countries, and

(v)          leading to a change in trade patterns with no significant reduction on emissions, and such actions will not succeed in either forcing or encouraging other countries to adopt equivalent environment policies.

1.4.  A study commissioned by the African Climate Foundation measured the potential impact based on different scenarios for ETS carbon price per tonne and product coverage. It found that even in the lightest scenario with the most limited impact, 'Africa's economy will be negatively affected by the CBAM with exports to the EU declining by 4% in total, that Africa will be worse affected than any of the other major economies analyzed...that even at €40 per tonne, the CBAM will raise EU import tariff revenue substantially, but have little impact on global CO2 emissions.' With a higher carbon price and more extensive product coverage, Africa's exports to the EU would decrease by 5.75%, 'with Africa's GDP falling by 1.12% (almost twice the initial scenario of a partial CBAM and a lower carbon cost)'. With the impact unevenly distributed among individual countries, some would be affected by more than these averages. These include Mozambique (an LDC), one of whose most important exports is smelted aluminium. According to the Center for Global Development, the CBAM levies on its aluminium exports could reduce its GDP by 1.5%. This places a huge disproportional responsibility to a continent that is among the least responsible for greenhouse gas emissions, but among those most effected by climate change.

1.5.  WTO rules do not prevent countries from adopting environmental policies. WTO rules allow complementary trade measures that are conducive to effective implementation of domestic environmental policies but aim to prevent such measures from creating unnecessary obstacles to trade. Therefore, any climate justified measures that directly restrict market access by developing countries and LDCs (e.g. by imposing levies), particularly where research shows the gains in reduction of carbon emissions is minimal, should be avoided.

1.6.  Beyond trade, unilateral environmental measures could have implications from an investment, industrial development, and job creation perspective. In addition, the distributional impacts of such measures will be huge and the administrative and compliance burden and cost for exporting will require adequate systems, controls, and procedures to calculate and report on the quantity of carbon embedded emissions. These will be difficult and prohibitive for most, if not all developing countries, particularly if the products contain several different inputs as implications will be felt on the composition and dynamics of entire value chains.

1.7.  Environmental concerns also risk being used as the justification for technical barriers to trade (TBTs), further limiting developing country, including LDCs market access. In addition, attempts to recategorize and "greenwash" agricultural subsidies in the context of agricultural reform negotiations, only perpetuate the imbalances in global agricultural trade.

1.8.  Environmental requirements are increasing daily and increasingly will affect developing countries' market access significantly. The AG seeks to ensure that the climate agenda and measures implemented in the context of the environment are not used to advance unilateral and protectionist measures and create competitive disadvantages or limit foreign competition for countries that do not meet those standards.

1.9.  There is a need to shift the narrative regarding the trade-environment nexus, with more emphasis on how to address the harmful impacts of trade or trade agreements on the environment, while recognizing the needs of developing countries. Green industrial policies are key if developing countries are to adapt to the stresses of a changing climate and are important as there is a need to enhance developing country resilience to better manage, adapt and respond to climate risks. Developing countries are already suffering economic losses due to climate-related disasters. Adaptation costs for developing countries are continuously increasing and these will only rise further as temperatures increase. Adaptation is less a matter of risk management and more one of industrial development and policies. Therefore, measures adopted by developed countries as part of industrial policies aimed at developing green industries should be available to developing countries. As such, the use of policy tools to promote green industrialization should be generalized and made available to developing countries to level the playing field. This necessitates that the CTE engages on issues of importance to developing countries. Doing so highlights the need to better understand the complex relationship between trade, sustainable development and the environment, and the link and role international trade can play.

1.10.  This paper serves as an essential point of reference in addressing trade and environment issues; to promote policy dialogue among the members; to enhance the transparency of unilateral measures; to identify gaps; and to address the interface between trade, environment and sustainable development with the aim of ensuring that all trade and environment measures are geared towards a sustainable development framework.