Trade lessons for climate negotiators

November 16, 2009

- John Kemp is a Reuters columnist. The views expressed are his own –

As hopes for reaching a binding agreement to cut greenhouse gas emissions at the Copenhagen summit die, climate negotiators could learn useful lessons on how to structure the negotiations from the multiple rounds of trade talks within the GATT/WTO framework.

Climate negotiations are about limiting carbon dioxide emissions, but the negotiators are also hammering out a complex economic instrument that will define the distribution of production, energy use and income in the next few decades. It is the agreement’s profound economic effects that are making it so hard to reach a final deal.

While the stalled negotiations on the Doha Round might make it seem likely an unlikely role model, the GATT/WTO process has successfully created a legal framework for liberalising world trade through eight successive rounds of increasingly complex negotiations, as well as a dispute settlement system accepted by all major countries.

In the process, negotiators have already had to resolve many of the difficult issues bedevilling attempts to reach an emissions deal:

* How to obtain treaty commitments from a huge range of countries at different stages of economic development.

* How to handle negotiations with the United States, given the peculiar nature of that country’s constitutional arrangements.

* How to ensure countries live up to their commitments and resolve subsequent disputes about treaty implementation.

Climate negotiators could usefully apply many of these lessons to their own agreement. As Copenhagen falters, they may need to rethink the “road map” for talks to improve the chance of bringing them to a successful conclusion.

FRAMEWORK AND DETAILED SCHEDULES

The 1947 General Agreement on Tariff and Trade (GATT) established a legal framework and general principles for trade liberalisation. But detailed tariff reductions as well as commitments on subsidies, dumping and technical barriers were left to a later series of trade rounds. These commitments were then turned into schedules of concessions for each member country and incorporated by reference into the central treaty.

Negotiations started with a series of limited tariff reductions that were gradually made more ambitious. Part IV of the GATT, added in 1966, guaranteed developing countries “special and differential treatment” to encourage them to become involved in the tariff-reduction process and make their own binding commitments.

For each round, political leaders set broad objectives at the outset, but the detailed exchange of “concessions” was handled by lower-level officials in a Trade Negotiations Committee (TNC).

Something similar is needed for the climate talks. President Barack Obama has already backed a “two-step” process. Political leaders would aim for an “operational agreement” at next month’s summit while leaving a legally binding agreement until 2010 or later. [ID:nSP280582] The aim is to ensure agreement on the big issues is not held hostage to myriad disputes over the details.

It might make sense to separate an agreement on the broad framework (including establishment and review of targets, trading emissions allowances, technology transfer, funding, and dispute settlement) from the details (including specific reduction targets and how much developed countries pay their developing counterparts to help mitigate the costs of technology upgrades).

It might also make sense to agree fairly easy reductions in the first round, then hold further negotiations in coming years to make targets more ambitious, using salami-slicing tactics rather than a big-bang approach. This would also allow developing countries to adopt modest emissions cuts in round one, with the aim of toughening them further in subsequent talks.

But for a two-step process to work, political leaders must give clear instructions to lower-level officials responsible for detailed negotiations (including clear scope for eventual concessions). If not agreement will become bogged down over relatively small differences in percentage reductions, as the Doha Round has become stalled over farm subsidies and tariff cuts for developing countries.

THE PROBLEM OF SENATE RATIFICATION

Trade negotiators are already used to the idea that an agreement is subject to a “double lock.” Deals require approval at international level and by the U.S. Congress (either by a two-thirds majority in the U.S. Senate if the deal is presented as a treaty, or a simple majority in both houses if the deal is presented as ordinary legislation).

The existence of this double lock confers an advantage on the United States since other countries have to negotiate twice — once with the administration and then again with Congress. Having given one set of concessions to the president’s officials to secure a deal, other countries may have to make even more concessions to get the deal approved by U.S. legislators.

To encourage countries to make meaningful concessions without fear the final deal will be re-opened, U.S. presidents have often been required to obtain “fast-track” negotiating authority binding Congress to a straight up-or-down vote within a set time on the results of a trade round.

Negotiations are usually structured as a “single undertaking” in which every commitment or concession is part of a whole and indivisible package and cannot be agreed separately: “nothing is agreed until everything is agreed.”

In terms of sequencing, trade negotiators have usually sought to reach an international agreement first and then presented the deal for congressional approval.

Until now, the climate negotiations have been using the opposite approach. The Obama administration has sought to obtain an ambitious climate bill including cap-and-trade from Congress (HR 2454, S 1733) and then use this to persuade developing countries such as China to offer significant emissions reductions at the international level.

But experience with trade negotiations suggests that an international deal precedes U.S. action, and does not come after it. It is unlikely Congress will agree to stringent targets without some assurance other countries will follow suit, including large future emitters such as China and India. So the international track may need to move first, or at least in parallel.

The Obama administration needs to harvest a number of provisional commitments from its international partners to have any hope of getting a climate bill through the Senate. If it is structured as a single undertaking, the various parties would offer tentative commitments. Once a deal is done, it would be taken back to the Senate to be incorporated into U.S. law.

The only question is whether the president would need to obtain some sort of fast-track authority. This is probably not necessary as long as the president’s Democratic Party controls both houses of Congress with comfortable majorities.

But it does set a deadline for a deal. Negotiators would need to reach agreement by next summer, well ahead of the 2010 mid-term elections, unless the Democratic Party appears on course to retain comfortable majorities, in which case negotiations could take longer and still reach a successful conclusion.

DISPUTES, NULLIFICATION, IMPAIRMENT

U.S. lawmakers are already suspicious that other countries will not adopt meaningful targets or will cheat on those they do agree. So any climate deal will need a mechanism for settling disputes. If not, countries are likely to retaliate unilaterally against partners they believe are not living up to their commitments, which could unravel the whole system.

From the beginning, GATT Article XXIII allowed a country to request formal consultations with another treaty member if it believed expected benefits under the agreement were being “nullified or impaired,” and this has been worked up into an increasingly formal and effective dispute settlement system.

If emission targets and aid packages are structured as part of a mutual exchange of concessions among treaty signatories, so one country’s targets are conditioned on other countries meeting their own, the climate treaty will need a similar dispute mechanism.

Rather than attempt to create one from scratch, it would probably be better to use the WTO system as a template and modify it to take account of the climate accord’s unique characteristics.

4 comments

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I really regret China holding on a position that if you USA as a developed nation had polluted the atmosphere for past 50 years or so, then we China should be allowed to do same for say another 30 years before we sit down and set concrete targets for future. The world has time differences, but not the environment.

Posted by Terry Edmonds | Report as abusive

Trade lessons you say. NOT true and wrong. what is required is Engineering Lessons.And Big Business lessons. The first cars(Robots)ran on alcohol moonshine .OR wood Gas or marijana oil. ALL was CARBON Neutral. BUT that was made illegal by Puppet Rulers and only PETROL was Legal from BIG companies. Do not let the Fox fix the problems.

Posted by Richard | Report as abusive

It boils down to money. If there is a way to make solar-powered car at 30% of the normal car, every country will go for it.There is no need to argue who emits more greenhouse gases.Instead of discussing about cutting down on greenhouse gases emission, a more constructive way is to discuss about research into clean energy.

It is unfortunate that negotiations are required for nations to act to save the planet. The world is still reeling from the broken down negotiations in Paris 1919(Treaty of Versialle). I hope the “climate negotiators” exercise logic and not emotion. The consequences of flawed negotiations and another ineffective climate accord will prove to be calamitous for humanity.

Posted by Anubis | Report as abusive