Climate and trade policies: from mutual destruction to mutual support

There is no doubt that trade and climate policies can be mutually destructive. But there are three strong reasons to suggest that they can also be mutually supportive: they have a common problem, common foes, and common friends. Mutual support would be much stronger if the world regimes for these two policies shared a few common principles. The climate community should feel at ease with the broad WTO principles of ‘national treatment’ and ‘most-favoured nation’, and rely on them in building its own treaty and institutions. The trade community should grasp the opportunity to benefit from the better disciplines on adjustment policies that it is hoped the climate community will design. These conclusions should put the many pending problems into a more positive perspective, and persuade negotiators to find pragmatic compromises, as was the case with the GATT. Using this perspective, the paper focuses on a few key issues, such as the definition of carbon border taxes and the reasons to ban carbon tariffs. Other cases of mutual support are examined. For instance, the climate community should not repeat the mistakes of the world trade regime in dealing with the developing and least developed countries.