Geneva winds of trade – A vision for nature-positive trade at the WTO

Mari Carlson | March 16, 2023

An informal roundtable on Nature-positive Trade for Sustainable Development took place on 14 March in Geneva, organized by the World Trade Organization (WTO) and United Nations Environment Programme (UNEP). While the discussion touched upon the various breaches of environmental sustainability and linkages to trade, biodiversity was in the spotlight today (see in particular Convention on Biological Diversity (CBD) and the Kunming-Montreal Global Biodiversity Framework (GBF) adopted in December 2022).

For those who are less familiar with the environmental sustainability and trade policy work at the WTO, biodiversity has not paved its way in those discussions yet. The CBD has requested for an observer status in different committees at the WTO but so far it has not been a story of success. It is noteworthy therefore that, Mr. Aik Hoe Lim, the Director of the Trade and Environment Division at the WTO, opened the roundtable by acknowledging his gratitude that WTO Members are welcoming the discussion about nature-positive trade nowadays at the WTO. Even I could say that today felt like a small victory for the biodiversity in its race towards the semi-finals of the “most pressing (sustainability) issues in trade policy discussions at the WTO”. However, remember here (emphasis added), environmental sustainability topics such as climate, plastics pollution, biodiversity, circular economy, and so on, should not be seen as rivals. They are mutually supportive and each one is needed to prevent the environmental crisis from getting completely out of hands.

In the roundtable, Mrs. Marianne Kettunen, who is a senior policy expert and advisor on sustainable development and the environment currently working for the Trade, Development, and the Environment Hub (Trade Hub) introduced findings of a new report offering a vision for mutually supportive framework for trade and biodiversity. The report, appraised by the experts to be ready-for-implementation, presents a more holistic view on nature and biodiversity in the trade and environmental sustainability work at the WTO. The report bridges the gaps and shows that trade policies and the existing work at the WTO can, directly and indirectly, be supportive for the implementation of the global biodiversity framework. In her intervention, Mrs. Kettunen underlined that there is no need to establish new processes at the WTO but to bring biodiversity more holistically in the existing work such as the informal working groups within the Trade and Environmental Sustainability Structured Discussions (TESSD) or in the Informal Dialogue on Plastics Pollution and Trade (IDP). There are also many other working groups and streams which are linked to biodiversity such as agriculture and agricultural subsidies, fisheries subsidies, or fossil fuel subsidies to name a few. There are also different (voluntary) sustainability standards related to trade (but outside the WTO) aiming at supporting the environment, but the abundance might sometimes actually be – a trade barrier. So, more streamlining and cooperation is needed.

Yet agriculture was mentioned in almost every intervention and is a part of the report too, Ms. Rebecca Barton, Counsellor in the Permanent Mission of Australia to the WTO, focused solely on speaking about the role of agricultural trade policies in enabling (or perhaps currently impeding) nature-positive trade. She reminded that agricultural negotiations handle many critical issues such as food security in addition to other perspectives. She raised questions such as how to solve these critical issues while contributing to nature-related goals or how to solve the issues related to agricultural subsidies which tend to distort markets or are in many cases harmful for the environment. Regarding agricultural subsidies, a comment from the audience suggested that the trade community should make an exercise to identify between really environmentally harmful agricultural subsidies and those that actually contribute to nature-positive outcomes. Lastly, Ms. Barton noted that environment in mentioned in the preamble of the WTO Agreement on Agriculture as a non-trade issue, which perhaps is totally outdated. And actually, I have heard some discussion here in Geneva, that some folks would be viewing the WTO Agreement on Agriculture with “green lenses”. 

In addition to the subsidy, discussion was brought by Mrs. Diane Holdorf, Executive Vice President for the World Business Council on Sustainable Development, who also included energy subsidies and the mining sector as important topics in the nature-positive trade related discussions. Bringing in the business perspective, Mrs. Holdorf called for clarity and granularity in the trade rules supporting nature-positive trade as private sector companies are making efforts to advance green transition, but many times trade rules are vague and do not guide companies to the right direction. She also noted that funding and investments are the key, and one should figure out how to structure the financial flows to truly support the green transition. The importance of linking investments with changes in trade policies received support and it is clear that investments and finance are needed to induce the changes that “green” trade policies intend to push forward. (This is by the way, what our MATS project aims to do in the context of agricultural trade policies.) Lastly, Mrs. Holdorf underlined the importance of multistakeholder processes as policy making needs those who implement the changes: “we need farmers, processors, retailers, civil society, and so on” – enabling environment is a key for businesses to change things for better. She well concluded her intervention that breaking the silos within, between, and across the organizations is the key.

The roundtable was concluded by Mr. Lim who made a very important point regarding the differences between environmental policy making and trade policy making. Trade policy continues to be steered by political reasoning whereas environmental policy is evidence-based, and the international (trade and environment) community should clarify to what extent these different starting points are true for both. If there is no willingness to do that, it will be really difficult to bridge the gap between environmental and trade policy work.

It is clear that the WTO rulebook needs an update and, while some topics are progressing, there is yet vast amount of work to be done to get all WTO members on the same page. Understandably, it is hard to turn the tide when originally at the WTO environmental sustainability has been treated as a non-trade issue, and the discussions have been marginal in the Committee on Trade and Environment with no substantial progress in the rules making. However, recent years have confirmed that this cannot be the case, at least for many countries. Silo-based thinking has to be broken and trade policy makers and environmental policy makers should find a way to cooperate and understand each other. Wider stakeholder involvement, both in Geneva and at national capitals, in a necessity to craft trade rules in a meaningful and feasible way. Finally, we need a connection between the trade policy induced changes and the finance and investment flows. Now we only must start ploughing, sowing, and hopefully harvesting in line with the SDGs, wishing for a stable climate and a healthy environment for the seeds to grow.

Mari Carlson is the co-coordinator for the MATS project. She is also a doctoral researcher in the doctoral programme in Sustainable Use of Renewable Natural Resources at the University of Helsinki. Her research combines trade policy, environmental sustainability, and agriculture.

Making agri-food trade more environmentally sustainable, or sustaining the policy fog by making more trade-relevant policies? A note on F2F, Green Deal, ETS, and CBAM

Mari Carlson & Bodo Steiner | January 25, 2023

Green Deal and F2F strategy are clear about the EU’s willingness to promote sustainable agri-food sector globally through its external policies, including international cooperation and trade policy. The work is ambiguously based on cooperation with partners and in different international foras, but it has a strong autonomous perspective – better known as open strategic autonomy, also visible in the EU’s trade policy strategy. Both Green Deal and F2F make strong references to restricting market access for goods that are not produced according to EU’s environmental (or other) standards. It also points out a need to avoid outsourcing of unsustainable practices to third countries and to restrict importing such products into the EU market. Despite this is nothing new that the EU is requiring countries to comply with some of its relevant agri-food standards, this time the tone is more severe.

The first concrete autonomous measure linked to environmental sustainability in agri-food trade was the mandatory due diligence on deforestation free supply chains, which I wrote here last time. Since environmental sustainability is only one side of the coin, you should also check the one on social sustainability, hence forced labour. It is no wonder why some of the EU’s trading partners are a bit concerned. Such new measures are intending to regulate the way products are produced meaning that to gain access to the EU market, products must be produced according to the EU regulation. This is not an easy task particularly for developing country trade partners. It also certainly raises questions what is yet to come? Maybe an obligatory environmental footprint scheme? A carbon border adjustment measure on selected agri-food products?

If you try to make sense of what Green Deal says about sustainable agri-food trade, you will end up reading the Farm-to-Fork Strategy. While reading that, you realize that you need to consider a myriad of other strategies and sectoral policies from the Common Agricultural Policy to biodiversity, climate law, circular economy, forestry, carbon markets, transportation, competition rules, trade policy, and a comprehensive list of others. These will all be affected by the Green Deal, and they will, in one way or another influence EU’s international agri-food trade. However, it is impossible to say in just a few sentences what environmentally sustainable agri-food trade is, according to the EU. It includes all the stages in the value chain, not just farming and processing, which explains the necessary interdisciplinary view needed to understand ‘environmentally sustainable agri-food trade’. Another thing is to make agricultural production itself environmentally sustainable, so how much trade policy can do? At least agri-food value chains have typically become more global, which increases the role of trade policies in regulating traded goods and increases the need for government policies that focus on facilitating participation in global value chains, so as to facilitate added value creation.  

Yet unlikely implemented any time soon, discussion exists about extending carbon pricing to agricultural sector (e.g. here, and here), mostly concluding its infeasibility, inefficiency, and a high risk of carbon leakage without carbon border measures. Note also that agricultural emissions are not only carbon emissions; 31 per cent of human-caused GHG emissions, originate from the world’s agri-food systems, and the FAO calculated that cattle generate up to two-thirds of the greenhouse gases from livestock, and are the world’s fifth largest source of methane. However, New Zealand has recently published a plan for pricing its emissions on agricultural sector which will showcase other countries how such a mechanism would work. It is to be seen, how New Zealand copes with the carbon leakage. And so, why was I raising this issue of carbon border measures before? While F2F makes no references in adopting such measures for agriculture, the Green Deal put forward the Carbon Border Adjustment Measure (CBAM) for some industrial goods. Before its publication and even after, some concerns among the agri-food sector were heard whether the product coverage could be extended to agri-food products. In its current form this is not the case, and we only find indirect linkages to agricultural sector through some inputs such as certain fertilizers, which are subject to the mechanism. This of course includes the potential for price increases and in some cases concerns regarding availability of fertilizers in the EU market, but again, it does not directly target agri-food trade. The CBAM is actually linked to the revision of the EU ETS as a mechanism to gradually replace the free allowances system, to prevent ETS induced carbon leakage for those sectors already subject to the EU ETS. There is lots of misunderstanding and misinterpretation available on the CBAM but building the link through the ETS free allowances hopefully makes its purpose clearer.

Lastly, I would like to consider one more initiative meaningful for making agri-food trade more environmentally sustainable, which is perhaps not talked about enough. Probably one of the largest packages in the Green Deal is the revision of the EU’s Emissions Trading System. This reform will have far-reaching impacts on many value chains and their trade through transportation. This is because the ETS 1) is strengthened in the aviation sector, 2) will be extended to shipping sector, and 3) an own ETS is to be established to cover emissions from fuels used in buildings and road transport. This will inevitably increase transportation costs within, into and from the EU market. We hope for a quick green transition in the transportation sector – otherwise we might end up having unsustainable agri-food trade at least in economic terms. But is hope enough in the face of increasing trade-relevant policy-fog?

Mari Carlson is the co-coordinator for the MATS project. She is also a doctoral researcher in the doctoral programme in Sustainable Use of Renewable Natural Resources at the University of Helsinki. Her research combines trade policy, environmental sustainability, and agriculture.

Bodo Steiner is the coordinator for the MATS project. He is professor of Food Economics & Business Management, head of the research group Management & Organizations For Sustainable Food Systems, deputy director at the Department of Economics and Management, University of Helsinki. See his comprehensive list of publications, projects, activities, and much more here.