WTO and Kyoto: Some Negotiating Similarities — And Some Differences

The two sets of negotiations, at least on the surface, share a common problem — operationalizing the concept of “special and differential treatment” in favor of developing countries.

In Kyoto jargon, it is called “common but differentiated responsibilities.” In both cases, this lies at the heart of many of the negotiating difficulties.

There is, however, a crucial difference between the WTO concept of “special and differential treatment” and the Kyoto concept of “common but differentiated responsibilities” that goes well beyond the minor difference in terminology.

In the trading arena, reciprocity for trade liberalization clearly gives a better economic result — and helps immensely politically in the process of selling trade liberalization in developed countries, since all developed countries have substantial numbers in their electorates who are deeply suspicious of trade liberalization.

At the end of the day, most governments know — even if they may have the greatest of difficulty explaining it to their electorates — that trade liberalization will improve the functioning of your own economy, even if undertaken unilaterally.

That is decidedly not the case with respect to “common and differentiated responsibilities” in the Kyoto context. There are two issues here.

First, there is a very real risk that developing a domestic policy response to the challenge of climate change without a great deal of reciprocity has no guarantee whatsoever that it will “improve your economy” — as is the case with non-reciprocated trade liberalization.

In my own country, New Zealand, for example, there is a huge and legitimate debate taking place on the balance of economic risk from climate change policy, particularly with respect to the treatment of agriculture.

Before Kyoto took such a prominent place in policy making, one might have thought that New Zealand, which is a food basket for the world, would see its moral responsibility, as well as its commercial interests, served by stepping up agriculture supply.

Not so. If we increase our food production, other things being equal, we increase our emissions, which are measured on a country basis.

The second major difference between special and differentiated treatment in the two negotiating spheres of the WTO and Kyoto is also crucial. The problem of climate change is truly a “global” problem.

The troposphere is a global phenomenon which does not differentiate between, say, greenhouse gases such as methane and nitrous oxide emitted by a New Zealand sheep — of which there are some 30 million — and emissions from Chinese sheep — of which there are some 400 million.

Yet if we expose, to continue this example, our sheep meat sector to the costs of an emissions trading scheme, given that there are strictly limited abatement opportunities available with current technologies, is this a rational result for the global climate? Well no, to put it bluntly.

Most of our sheep meat is sold in Europe — where, historically, around 70% or more of all imports come from New Zealand.

The research that is available indicates that to produce a kilogram of sheep meat in Northern Europe creates four times the volume of greenhouse gases that the same kilogram requires in New Zealand, even when full transportation costs are taken into account.

Thus, to the extent that New Zealand moves ahead of Europe — forget the 400 million Chinese sheep — and production at the margin shifts from New Zealand to Europe, the global climate problem becomes worse, not better. So much for the hysteria around food miles.

With regard to trade, we are clearly at a critical stage in the WTO Doha Round Negotiations. An agreement on modalities in Agriculture and NAMA, or Non-Agriculture Market Access, seems tantalizingly close.

Having been the Chair of the Agriculture Negotiations at an earlier stage, I am firmly of the view that there is a perfectly acceptable basis on the table for doing this deal. As is always the case, there are probably a dozen or more ways to assemble the elements of a compromise.

Negotiators habitually exaggerate the significance of their country’s preferred choice. That is fine and natural at the start of a negotiation, but after so many years of negotiation, surely everyone knows roughly what the so-called “landing zone” of a deal on any of the key outstanding issues is? It is no longer a blank page. The choices are constrained.

If we fail to bring the Doha Round together, when the case here is so compelling, the precedents are so strong, the technical base of multilateral trade disciplines so well understood and tested, what does this tell us about the chances of negotiating a timely successor to the Kyoto Protocol — one which builds on the Kyoto approach to Commitment Period 1?

The pressure to move forward on climate change is unstoppable. If there is no way to advance multilaterally, just as in the trade arena, countries will move unilaterally. It may not always be a positive development.

The logic here is easily explained. It is no longer tenable politically for most politicians, at least in developed countries, to do nothing about climate change. So countries are either implementing or planning emissions trading schemes.

The stakes here are very high. The WTO system has long grappled with the twin impulse to move unilaterally on trade issues and advancing multilateral solutions. As an outsider to the Kyoto negotiating process, it looks to me as if the same underlying issue faces this closely related area of multilateral negotiation.

If we get a mixture of hysteria and populism governing the policy response, one can be certain there will be tears. That is why, on both fronts, we need to do better.

Editor’s Note: This article is based on remarks presented at a seminar on climate change, agriculture and trade in Bogor, Indonesia on May 11-12, 2008.