Policy Innovations Digital Magazine (2006-2016): Commentary: The Rise of Climate Protectionism

Oct 7, 2009

A new and dangerous form of trade and technology protectionism is fast emerging in the name of climate change, and it is poisoning North-South relations in the two negotiating arenas on climate change and on trade.

There are clear signs that some developed countries, especially the United States, are preparing to use unilateral trade measures, such as imposing tariffs, taxes or charges on the products of developing countries, on the grounds of combating climate change.

A bill passed recently by the U.S. House of Representatives gives the U.S. president authority to impose financial charges (or taxes) on some imports coming from developing countries that in the U.S. view are not taking enough action to curb their greenhouse gas emissions.

The U.S. House of Representatives has also sought protectionism against technology transfer through three bills it has adopted that prevent U.S. negotiators in the UN climate change convention from agreeing to any relaxation in the rules or enforcement of intellectual property. There are signs that other developed countries, including in Europe, are also preparing the grounds for climate-linked protectionism.

The developing countries are starting to oppose these moves. Indian political leaders protested to Hilary Clinton about the threat of U.S. carbon tariffs during her visit. China's Commerce Ministry has also criticized the protection element in the U.S. climate bill.

Most importantly, the developing countries have taken up the issue at the climate talks leading up to Copenhagen. On August 13, the G77 and China made a statement at the Bonn climate talks, warning developed countries not to adopt unilateral trade-restrictive measures, as these would contravene the Climate Change Convention's provisions.

India also proposed text for the Copenhagen outcome, that developed countries "shall not resort to any form of unilateral measures including countervailing border measures, against goods and services imported from developing countries on grounds of protection and stabilization of climate."

The text listed many provisions of the Convention that would be violated if such measures are taken. This was supported by many countries, including China, Argentina, Brazil, Singapore, South Africa, Saudi Arabia, and by the G77 and China's statement.

In Geneva, many developing country diplomats are increasingly concerned about the likelihood of the United States and other developed countries making use of either tariffs or financial charges on imports of developing countries. Imposing extra tariffs or financial charges on imports on the basis of how the products are produced ("process and production methods" or PPMs in technical jargon) is very controversial. It has been rejected by developing countries at the WTO since 1996 as a form of protectionism, which they say will unfairly curb developing countries' exports. They also argue that it is against the rules of the WTO.

Many developed countries however have wanted to make use of trade measures on environmental grounds. They are preparing the case that trade measures linked to PPMs are legitimate, or else climate-linked trade measures are allowed under the GATT's general exception for the environment.

Developing countries claim that linking trade measures to climate and the environment are unjust because they have lower technological capacity and thus cannot match the developed countries. Developing countries should instead be assisted through technology transfer, but the IPR regime (especially the TRIPS agreement) is an obstacle, and now the U.S. Congress is proclaiming that the U.S. administration cannot allow relaxation of the IP rules.

If climate protection is allowed, it will also open the floodgates to all kinds of protection by blocking developing country products on the basis of how they are made.

This "mother of new trade protection" is coming at a time of economic recession when world leaders have piously proclaimed they will not resort to trade protection. The climate-trade issue is thus explosive, and is opening a Pandora's box which threatens to contaminate the negotiations in the UNFCCC as well as the WTO.

Before the situation deteriorates, developed countries should re-consider their moves on this issue, restrain the climate-protection forces in their society, and commit instead to a "fair game."

Martin Khor is Executive Director of the South Centre. He can be contacted at: [email protected]. For further reading on Climate Protectionism, check out this special edition of the South Centre bulletin.

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