Exclusive Interviews, MC12, World Trade Organization

WTO’s Jean-Marie Paugam: Trade is part of the environmental solution

Jean-Marie Paugam, Deputy Director-General of the World Trade Organization, spoke to Borderlex about how the nexus between trade and environmental policy is being addressed in Geneva. Paugam sees a paradigm shift. By Rob Francis.

Jean-Marie Paugam sat in his office overlooking Lake Geneva to the mountains beyond when we walked in to sit down for a conversation.

It was the week of the institution’s annual Public Forum, and Paugam was speaking on several panels related to trade and the environment, specifically around how trade can be a driver towards environmental protection.

“At the WTO we are beginning to see a paradigm shift,” he said, leaning forward intently.

“Today we are moving away from the perception that environmental protection represents a cost, and towards an understanding that it’s unsustainable trade which is destroying the economy.”

“The old trade and environment agenda from the Doha negotiations has been frozen”.

Paugam has all the credentials to be at the forefront of this change in thinking. A former French envoy to the WTO, he cuts an energetic and accessible figure.

For many years environmental protection was viewed at the WTO, not as being an obstacle to trade as such, but rather as being someone else’s business, Paugam recalled.

Yet sustainable development has always been there in the background and is even explicitly mentioned in the Marrakech Agreement from 1994 and Article 20 of the General Agreement on Tariffs and Trade.

Plurilateral initiatives on trade and environment

So who is pushing the environmental trade agenda today?

“The private sector, green finance, unilateral trade policy instruments (such as the EU’s Generalised System of Preferences) and bilateral free-trade agreements,” Paugam responded, “although for sure, not everyone agrees that this should be a priority.”

The lack of consensus among the WTO’s 164 members on this matter is precisely why some likeminded governments have formed so-called ‘plurilateral’ initiatives among a subset of parties.

The Trade and Environmental Sustainability Structured Discussions – also known by their acronym TESSD – is one such plurilateral initiative which expects to be able to prepare a joint statement in time for the WTO’s twelfth ministerial conference at the end of November.

Launched in November 2020 by 53 members, the TESSD is exploring how trade policy can help address climate change and other environmental challenges.

Also in the pipeline for the ministerial is a statement from the Informal Dialogue on Plastics Pollution as well as a declaration on fossil fuel subsidy reform.

Unlike the all-member bread-and-butter negotiations on issues such as fisheries subsidies and agriculture, the environmental discussions, alongside other plurilateral initiatives, seem to be a subject of stimulating discussion and potential convergence among those participating.

Paugam seemed cheerful.

“Trade is now seen as part of solution,” he says. “We need win-win solutions, and the notion of green protectionism is becoming outdated”.

“The plastics initiative is an exploratory discussion, it is not a negotiation. We are trying to understand what is really happening when it comes to trade flows of plastics and what could be done to fight it.”

There is also a workstream to discuss how to improve the transparency of notifications for plastics, as well as possible incentives encouraging the dissemination of recycling technologies.

The WTO secretariat deputy DG sees TESSD as an exciting new development.

“The TESSD represents a new impetus on trade and environment, and it will provide the first holistic approach to address climate change at the WTO.”

Interests of poor countries

There is often a perception that environmental protection is a preoccupation of developed countries alone – quite literally a first-world problem.

With Covid-19 vaccination rates in developing countries still in single figures and their economies impacted as a result, perhaps the Global South has bigger issues on their mind?

Paugam denied this.

“It is not true that environmental protection is only being prompted by rich countries. The TESSD is being led by Costa Rica alongside Canada, and many of its members are developing countries. The plastics discussions are being spearheaded by China, Fiji, Morocco, and Ecuador.”

The discussion on plastics is also attracting the attention of least-developed countries, since they are often the unwilling dumping ground for plastic waste. Not surprisingly therefore, they see the WTO plastics dialogue as a clear opportunity.

This trend is backed up by the statistics in the WTO Environmental Database  which show a growing trend in the number of notifications and measures notified since 1997 and in particular over the last 10 years.

The number of environment-related notifications currently stand at 6,661, in addition to 14,119 environment-related measures, with a relatively even split between developed and developing/least-developed countries.

On notifications regarding trade-related plastic measures, 59% come from developing countries and 13% come from LDCs, whilst around half of the 477 notifications concerning forestry were provided by developing countries.

“The WTO is the one place where developing countries can defend their interests, given that each country has a voice, and they see this as an opportunity,” said Paugam.

“For example, if the issue of special and differential treatment in fisheries is very hard to negotiate, it is precisely because what is at stake is taking  into account the interests of poorest countries.”

EU’s carbon border measure raises eyebrows in Geneva

Paugam’s cheerful tone altered slightly when the issue of carbon border adjustment mechanisms was brought up.

The recent regulatory proposal from the European Commission, Paugam says, “has certainly attracted a lot of attention at the WTO”.

Although it appears “well thought-through” in terms of its compatibility with WTO, the EU’s unilateral move is concerning “since the devil is always in the details; but the fact that the EU has planned for a three years “blank shot” period is a good sign of openness to dialogue”.

What worries Paugam is the lack of consultations between WTO members and the risk that other countries set up their own carbon border adjustment system, leading to inevitable system fragmentation.

“While our first best would be a global carbon price, we can’t stop countries from doing what they want, and we can’t prevent fragmentation – but we can minimise the cost of fragmentation as long as countries want to work with the WTO,” said Paugam.

This pitch for multilateralism echoes that of Paugam’s boss, Director-General Ngozi Okonjo-Iweala, for whom climate change is “a major concern for the world economy”.

In Paugam’s company, it’s easy to forget the gridlock elsewhere in the organisation.

The hitherto absent environment agenda in the world trade institution is gearing up. The plurilateral initiatives in the sustainability field will likely result in some form of ‘deliverable’ at MC12. Countries which are not formally participating in them are taking an interest.

The EU, for its part, has recently joined the New Zealand driven plurilateral on fossil fuel subsidies.

Slowly but steadily, Paugam’s paradigm is shifting.

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