Multilateral Trade Measures in a Post-2012 Climate Change Regime?: What Can Be Taken from the Montreal Protocol and the WTO?

The climate-trade nexus gains increasing attention as governments are taking great efforts to forge a post-2012 climate change regime to succeed the Kyoto Protocol. This raises the issues of the scope of trade-related measures and of when and how they could be used. To gain some guidance on the scope of trade provisions in a post-2012 climate regime, this paper first discusses the Montreal Protocol in which such trade provisions have been included. The paper argues that while it is unlikely for developing country parties to agree the inclusion of trade-related measures in a post-2012 climate regime, trade-related measures should, at the very least, be contemplated for a set of industrialized countries (Annex I or II countries) as part of the evolving climate regime. It should be specified how these measures will apply to non-complying parties within this group and when and how unilateral trade measures can be used against countries outside the group. To that end, the paper emphasizes that there is a clear need to define comparable efforts towards climate mitigation and adaptation to discipline the use of unilateral trade measures at the international level, as the Lieberman-Warner bill in the U.S. Senate demonstrated great possibility that some industrialized countries, if not all, are considering the term “comparable” as the standard by which to assess the efforts made by their trading partners in order to decide on whether to impose unilateral trade measures on them. While that bill died on the floor of the Senate, this is by no means the end of the prospect for border adjustment type of unilateral trade measures bill. The paper argues that the Lieberman-Warner type of border adjustment bill, in its current form, is likely to face WTO-consistency and methodological challenges. It also holds out more sticks than carrots to developing countries. In order to encourage developing countries to do more to combat climate change, the paper suggests that developed countries should clearly focus on carrots. Sticks can be incorporated, but only if they are credible and realistic and serve as a useful supplement to push developing countries to take actions or adopt policies and measures earlier than would otherwise have been the case.