Climate Change and the Trading System

November 30, 2009

Two vitally important policy areas – trade and climate change - are intersecting, posing difficult questions about how to provide effective action on climate change without damage to the international trading system. On October 26-27, 2009, experts from both fields discussed the risks and possibilities for dealing with them. Main points discussed by the participants include: - The consequences of adequate measures, including trade policy measures, in response to actual or proposed climate change policies, are scarcely being thought about. - Thus, two vitally-important elements of international governance risk confronting each other, posing complex questions about how to provide for sound and effective action on climate change without collateral damage to the international trading system. -The existing international institutional framework was designed for another era with its different challenges. There is at present also a leadership vacuum within the system that no longer has a hegemonic influence to help shape the consensus and cohesion that occurred from the Second World War onward. - The current World Trade Organization-based international trading system has been dealing with some of the potential opportunities of a more green-based economy through the current Doha Round of worldwide trade negotiations, where environmentally-sensitive goods and services trade is to be liberalized and technology to improve green infrastructure opened further. - Two negative matters relating to trade and climate change were also identified at the meeting and discussed at length: border carbon adjustment (import taxes or export subsidies) where both data, norms, and best practices are weak or non-existent; and subsidies under cap-and-trade emissions reduction policies, where concerns were thought to be even greater but where solutions involving international cooperation and agreed-upon rules are possible in the years ahead.

About the Authors

Dan Ciuriak is a senior fellow at CIGI, where he is exploring the interface between Canada’s domestic innovation and international trade and investment. He is the director and principal of Ciuriak Consulting, Inc.

Bob Johnstone is a senior advisor with the Canadian International Council.