Policy Brief 16, September 2009

International Trade and Climate Change.

The Waxman – Markey bill recently passed by the U.S. House of Representatives envisages certain measures to restrict carbon dioxide emissions and requires the president to levy a charge on imports of carbon-intensive products from countries that do not adopt similar climate change measures. U.S. importers would have to buy carbon “allowances” for such products, purportedly for maintaining a level playing ground between domestic and overseas producers.

The bill is directed particularly against emerging economies such as China, India, Brazil and South Africa.  Similar calls for countervailing border levies have been sounded in the European Union, mostly stridently by President Sarkozy of France.

A considerable body of literature already exists on the question of whether such unilateral trade restrictive measures are compatible with the WTO regime. There are advocates of both sides of the case; the mainstream view appears to be that compatibility is doubtful. In contrast, little attention has been paid in the literature to the question of the compatibility of the proposed unilateral trade restrictions with the universally accepted UN Framework Convention on Climate Change (UNFCCC), even though the answer to this question will be relevant in any future dispute settlement procedure in the WTO.

This policy brief examines the question whether the proposed measures are consistent with the UNFCCC. It comes to the conclusion that proposals for  unilateral measures to restrict imports from developing countries contravene the principles and provisions of the UN Framework Convention on Climate Change, in particular, Articles 3.1, 3.5, and 4.7 read with 4.2, 4.3 and 4.5.

Download