Cleaning Up Our Act: Using The Agreement On Climate Change Trade And Sustainability To Clarify World Trade Organization Rules On Process And Production Methods

Abstract

This paper observes that uncertainty in the application of World Trade Organization (WTO) rules on ‘like products’ has prevented States from using trade measures that distinguish products by their levels of embedded carbon as part of their toolkit to support the adoption of more sustainable, low carbon production and processing measures (PPMs). It argues that there is potential for the environmental and trade impact of the Agreement on Climate Change, Trade and Sustainability (ACCTS) to be increased by broadening the scope of the environmental goods negotiations to provide tariff preferences for ‘environmentally preferable products’ with carbon footprints below a benchmark. Doing so could also enhance legal certainty as there is a low risk of a WTO Panel finding that ACCTS tariff preferences for ‘environmentally preferable products’ discriminated against ‘like products’ in breach of General Agreement on Tariffs and Trade (GATT) Article I.1. This is because the ACCTS participating countries’ intend to extend the negotiated tariff preferences to all other WTO Members on an ‘most-favoured-nation’ (MFN) basis, and otherwise-identical products produced using less climate-friendly means could still be imported attracting the usual applied tariff rates. Though there are practical and implementation challenges that would need to be overcome during negotiations, agreeing tariff preferences for ‘environmentally preferable products’ in ACCTS would break new ground and serve as a lightning rod to normalise the adoption of trade measures to incentivise the transition to low carbon PPMs.