The Case for a Global Triangle Forum at the WTO

Over the last four years, the greening of the European Union's trade policy has progressed at a fast speed, as evidenced by a series of initiatives by the EU Commission which have resulted, or will result before the end of the present legislature, in the adoption of a host of new “greening trade” measures. They include notably the Carbon Border Adjustment Mechanism (CBAM), the Regulation on Deforestation-Free Products, the Directive on Corporate Sustainable Due Diligence (CSDDD), the Ecodesign for Sustainable Products Regulation, and mirror clauses to regulate agri-food trade. The overall purpose of these green trade initiatives is to align the EU’s import regimes with changes in the EU’s domestic regimes stemming from its new environmental ambitions—known as the European Green Deal and the Fit for 55 package—while respecting international trade rules.

These EU sustainability initiatives have received negative reactions from EU trading partners, in particular developing and least developed countries. Critiques centre around accusations of “green protectionism” and “regulatory imperialism”, given the unilateral nature of the EU’s sustainable trade measures; the measures’ anticipated economic impacts (since EU market access will be conditioned on compliance with EU sustainability measures); and climate justice concerns, embedded in the Paris Agreement through the principle of common but differentiated responsibilities and respective capabilities—which highlights that while states have common responsibilities for environmental protection, these responsibilities are also differentiated among states, given differences in socio-economic circumstances, greenhouse gas contributions, and states’ different technological and financial capacities to contribute to environmental protection.

In a June 2023 Europe Jacques Delors publication, EU trade and environment: Development as the missing side of the triangle (Triangle Paper), we argue that the EU should acknowledge that its green trade agenda is affecting, and will continue to disproportionately affect, some of its most vulnerable trading partners, and should therefore reemphasize the development dimension in the conduct of its trade policy. We highlight, inter alia, the importance of adopting a diversified approach, according to a country’s level of development, and ensuring the presence of adequate institutions or initiatives within existing institutions mandated to address the trade-environment-development nexus (the triangle) at the multilateral level.

Indeed, the trade-development nexus is within the mandate of both the World Trade Organization (WTO) and the United Nations Conference on Trade and Development (and of their joint agency, the International Trade Centre). While the trade-environment nexus is discussed under the WTO, most notably in the Committee on Trade and Environment (CTE), its mandate in this area is not always fully recognized, with some countries resisting attempts to discuss and negotiate disciplines that could help reduce trade frictions stemming from the heterogeneity of green trade policies for fear of legitimizing green protectionism. At the same time, trade and development issues are discussed in the Committee on Trade and Development (CTD). In the Triangle Paper, we call upon the EU to work with other countries to advance a proposal to create a Global Triangle Forum, with the WTO being the most natural place for it. This could come in the form of a new initiative or be nested within existing WTO committees—for example, by setting up regular joint sessions by the CTE and CTD focused specifically on addressing trade, environment, and development issues.

Recent developments hint at an increasing wave of support among WTO members for this idea. In June 2023, the EU’s fifteenth Trade Policy Review (TPR) took place—an exercise in transparency that examines a member’s trade and related policies at regular intervals. While the TPR does not have a specific “environment” focus, the most prominent area of concern expressed by members at this occasion was the European Green Deal and corresponding measures, including the CBAM, the Farm to Fork Strategy, and the CSDDD.

As reflected in the minutes of the EU’s TPR, in expressing concern about the European Green Deal, several members emphasized the unilateral nature of the EU’s green trade approach, and the risk, as they see it, that these measures could undermine the multilateral trading system. For instance, China noted that “it is regrettable to see [that] the measures taken by EU, such as CBAM, failed to follow the basic principles under the UNFCCC and Paris Agreement, as well as WTO rules.” Colombia noted that “the growing number of unilateral measures threatens to shatter our collective purposes and the multilateral rules” and, notably, called on the EU to “establish a procedure for cooperation that shares the costs of achieving its goals in an equitable manner that respects sovereignty, differing geographical conditions and the variety of means by which each of our countries can achieve its own aims.” Similarly, Brazil urged the EU to “observe the need for its trade-related environmental measures to comply with both trade and environmental multilateral rules […] call[ing] upon the EU to avoid attempts to impose specific standards and decarbonization strategies on other economies.” Mauritius, while “acknowledge[ing] the need to adopt measures such as the CBAM […] [notes that] these should not become unduly trade restrictive.” Peru expressed “conc[ern] that the European Union should opt for unilateral trade restrictions as a means of achieving environmental objectives, as these may not be the most appropriate tools [and could] threaten the development opportunities […] generated through trade.”

As remarked by the EU TPR discussant, Thai Ambassador Pimchanok Pitfield, members did not question the “what” or even the “why” of the EU’s sustainability efforts. Instead, most of the concerns expressed questioned the “how” with regards to the EU green measures and their respective implementation, suggesting that members might be interested in coming together to discuss how to best approach trade and sustainability measures through a multilateral approach. Similarly, the EU expressed openness to dialogue and cooperation with its trading partners, emphasizing the development dimension. In responding to the comments received during the review, the EU representative, Ambassador João Aguiar Machado, acknowledged that “achieving our sustainability objectives requires that we find the optimal triangle between trade, environment, and development” (emphasis added).

While TPRs do not currently include a separate section on environment, the fact that a growing number of environment and climate-related concerns are raised during TPR processes, as illustrated by the EU’s most recent TPR, signals the case for including this dimension as a separate section of the TPR process. It also showcases the interlinkages between trade, environmental measures, and development, reemphasizing the WTO as a natural place to have discussions on the trade-environment-development nexus. In this regard, the Villars framework for a sustainable global trade system recommends that members should agree to add sustainable development analysis to the Trade Policy Review Mechanism.

Over the past two years, there has been growing discussion in a number of WTO settings on the best practices and principles related to the design and implementation of trade-related climate measures, including in the CTE and in the Trade and Environmental Sustainability Structured Discussions (TESSD), where a working group is focused on such measures. Most recently, in mid-July, a submission on Principles guiding the development and implementation of trade-related environmental measures (Guiding Principles) was circulated at the request of the African Group to various WTO committees and councils. The Guiding Principles seek to address concerns of the African Group related to the unilateral nature of trade and environment approaches adopted by many developed countries. The document aims to provide a framework for future discussions on trade-related environmental measures, highlighting the “need to shift the narrative regarding the trade-environment nexus, with more emphasis on how to address the harmful impacts of trade or trade agreements on the environment, while recognizing the need of developing countries”.

The Guiding Principles document also suggests an increased openness from the African Group to recognize the WTO as a place to discuss trade and the environment issues. Indeed, it emphasizes that the CTE would be well positioned to host discussions on triangular issues. Moreover, the Guiding Principles document highlights “[t]his is not about being for or against the protection of the environment. Rather, it is about […] tak[ing] into account the unintended consequences of environmental measures on trade […] and recogniz[ing] the interests and the needs of developing countries.” In other words, as advocated by the abovementioned Triangle Paper, the emphasis is not on the “why” of environmental measures, but on the “what” and the “how”.

While the EU TPR, and the important emerging discussion on guiding principles, can serve as stepping stones to the creation of a Global Triangle Forum within the WTO, developing a consensus about the “how” and the “what” of such a forum will not be easy. The recent July 23-25 General Council meeting offered a glimpse into member’s different approaches. While China offered its full support for the Guiding Principles, the EU has expressed interest in fostering engagement between members but disagreed with the specific approach adopted by the African Group. Different reactions from WTO members with regards to the list of principles developed by the African Group does not suggest that trade-environment-development discussions at the WTO are a dead end. Rather, it points to the important task ahead of framing a set of basic principles in a way that enables mutual understanding and cooperation between members as opposed to a situation in which countries campaign to include overly prescriptive approaches on how these principles should operate and be implemented.

In this regard, the fact that countries are making submissions centred around the trade-environment-development nexus in the General Council can be considered a positive sign towards developing a Global Triangle Forum—either nested within existing committees or a stand-alone platform—to foster dialogue and cooperation on the trade, environment, and development nexus at the WTO.