As the world continues to grapple with the fallout from a financial crisis that has spread throughout the globe, there is a fear in some quarters that several wealthier industrial nations will revert to old-fashioned protectionism in an effort to stem the flow of production and jobs to other less expensive regions. And that this could be at the expense of climate change as measures to curb carbon emissions take a back seat. Such efforts are unlikely to go unchallenged. As rumblings of protectionism get louder, the global trade regime and its foremost regulatory body, the World Trade Organisation, find themselves once again firmly in the spotlight. Yet, as the Graduate Institute’s very own Professor Joost Pauwelyn, a professor of international law and a trade expert, has argued, there may be a way forward by tackling the economic crisis and climate change in an integrated and holistic manner and the World Trade Organisation may just provide the platform within which to do this.

In the run-up to the G20 Summit in London and US President Barak Obama’s visit to Europe, on March 24, 2009 the US House of Representatives Ways & Means Subcommittee on Trade convened a panel of experts to discuss how in light of the current economic situation US climate change legislation could limit both carbon emissions and job leakage and so help US industry to remain competitive.

Appearing before the Subcommittee Professor Joost Pauwelyn noted that measures to address U.S. competitiveness concerns in climate change legislation are often perceived as being in conflict with WTO rules yet, he argued, this does not have to be the case. Professor Pauwelyn noted that on the face of it, current WTO articles could render US industry less competitive if the US decides to cut its carbon emissions while some newly emerging – and emitting – economies do not act. However, he urged legislators to stop viewing the WTO as an excuse to not tackle climate change but showed how WTO articles and provisions could actually provide guidelines within which to draft legislation that could be used to both maintain US competitiveness while tackling carbon emissions.

Professor Pauwelyn argued that a “one size fits all” solution would not be tenable but that efforts need to be country and industry-sector specific. He described the different ways in which traditional cap-and-trade mechanisms, including free allowances for selected energy-intensive industries and carbon tariffs, could be used to limit both jobs and carbon being “shipped abroad” while still being in compliance with global trade agreements. He further made the case that subjecting the US to stringent carbon emissions would not provide a level playing field if polluting industries in other large carbon emitters like China and India are not similarly bound by some emissions targets, and that “common but differentiated targets” may offer a solution. He pointed out that rather than constituting an obstacle to such measures, current WTO articles and provisions actually have enough flexibility and offer positive insights on how to design cost-effective climate change legislation that protects the environment without discriminating against foreign trade partners. He concluded his testimony by emphasising that the US should “lead by example” at the Copenhagen climate summit at the end of this year, and that enlisting U.S. trade policy to combat climate change should only come as a measure of last resort in case negotiations fail.

Professor Pauwelyn’s testimony has been given added gravitas by recent comments from President Obama, during his European visit, who in a major break from the previous US administration, has pledged US leadership and responsibility in efforts to tackle climate change.

For the full text of Professor Pauwelyn’s testimony go to:
http://waysandmeans.house.gov/hearings.asp?formmode=detail&hearing=667&comm=5