A WTO ‘code’ on carbon tariffs

Using some­what fash­ion­able terms (‘green pol­i­cy space’) Huf­bauer et. al. describe a pluri­lat­er­al agree­ment whose mem­ber­ship would be vol­un­tary (like the present Gov­ern­ment Pro­cure­ment Code, for exam­ple.). It would cre­ate a set of gen­er­al excep­tions addi­tion­al to those found Arti­cle XX ofGATT. The excep­tions would pre­tend to per­mit the mem­bers of the Code to take actions restrict­ing goods trade, for exam­ple, that might oth­er­wise be pro­hib­it­ed by GATT and not cov­ered by an exist­ing Arti­cle XX excep­tion. The mea­sures cov­ered would be defined pret­ty broad­ly to include most mea­sures asso­ci­at­ed with defin­ing, enforc­ing (e.g. at the bor­der) a GHG tax or emis­sions quo­ta and with sub­si­dies relat­ed to the reduc­tion of GHG emis­sions. “Like prod­ucts” would also be very broadly—perhaps too rigidly—defined by ref­er­ence to 4‑digit Har­mo­nized Sys­tem classifications.

I use the terms “pre­tend to per­mit” only because the ques­tion whether a Code real­ly could except these actions from the nor­mal GATT rules would have to be deter­mined by the GATT dis­putes set­tle­ment pro­ce­dures on a case-by-case basis (that’s how dis­pute set­tle­ment always works). The authors spec­u­late that the Code could be nego­ti­at­ed ‘out­side’ the WTO, pre­sum­ably like the obscure ACTA nego­ti­a­tions. The rea­son for doing this—although the pro­vi­sions of the Code would con­cern WTO obligations—seems to be that WTO mem­bers hos­tile to the idea of cre­at­ing new excep­tions might pre­vent the adop­tion of a new WTO pluri­lat­er­al agree­ment. But a vio­la­tion of e.g. MFN oblig­a­tions on mar­ket access bar­ri­ers is sub­ject to WTO adju­di­ca­tion (and pos­si­bly to WTO sanc­tions) what­ev­er the ratio­nale for the bar­ri­er. Soon­er or lat­er, WTO dis­pute set­tle­ment will come into play whether the Code is a WTO pluri­lat­er­al agree­ment or not. The Appel­late Body has indi­cat­ed that it would take note of oblig­a­tions imposed as a con­se­quence of exter­nal (envi­ron­men­tal) agree­ments when con­sid­er­ing the appli­ca­tion of a WTO excep­tions pro­vi­sion to a mea­sure oth­er­wise incon­sis­tent with WTO oblig­a­tions. But that’s no guarantee.

Indeed, at one point, dis­cussing cli­mate sub­si­dies the authors rec­om­mend try­ing to keep the deter­mi­na­tion of dis­putes out of the adju­di­ca­tion sys­tem because of the dam­age it could do to the system

In gen­er­al, we believe that rel­e­gat­ing these mat­ters to the WTO dis­pute sys­tem is not the best course. If the Appel­late Body is too strict on trade-relat­ed cli­mate mea­sures, that could inspire greater crit­i­cism of the already-frag­ile WTO sys­tem. If the Appel­late Body is too lenient on trade-relat­ed cli­mate mea­sures, by accord­ing users of uni­lat­er­al mea­sures exces­sive def­er­ence, that could open the door to wide­spread oppor­tunis­tic pro­tec­tion­ism and rent-seek­ing behavior.”

Hmm… I agree with the idea of avoid­ing the adju­di­ca­tion dis­putes where pos­si­ble (includ­ing for this rea­son). But it seems impos­si­ble to do that where the dis­pute is about the appli­ca­tion of excep­tions pro­ce­dures such as those pro­posed by this Code.

There is, inci­den­tal­ly, an inter­est­ing Appen­dix to the book that con­tains a review of ‘Four Big Uncer­tain­ties’ in the debate on cli­mate change. The authors eval­u­ate the uncer­tain­ties in the sci­ence and con­clude that the risks in the ‘tail’ of a risk dis­tri­b­u­tion still mer­it mit­i­ga­tion. Their mod­er­ate rec­om­men­da­tion, how­ev­er, is that any WTO Code (and even any UNEP agree­ment from Copen­hagen) allow for the pos­si­bil­i­ty that alarm about cli­mate have a very dif­fer­ent aspect in 2019 than it has in 2009.

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