26 February 2018

Green Industrial Policy and Trade: A Tool-Box

On 22 February 2018 the Institute hosted the launch by UN Environment and its partners from the Partnership for Action on Green Economy (PAGE) of three major publications that will guide PAGE’s action on green industrial policy. The event featured several experts who drafted portions of these publications. We interviewed Professor Jorge E. Viñuales, Harold Samuel Professor of Law and Environmental Policy at the University of Cambridge and Adjunct Professor at the Institute, who authored one of the three publications: “Green Industrial Policy and Trade: A Tool-Box”.

What is the added value of a tool-box of trade-related policy options for the use of green industrial policy instruments?

International trade is an amplifier of the positive but also the negative effects that economic activity can have on social and economic development. The international trade architecture is a rule-based system, which was designed in its essence in the late 1940s, when environmental protection was in the minds of very few people and totally outside of the radar of institution designers. Despite its substantial revision in the early 1990s, when the WTO was established, the international trade architecture does not sit comfortably with the current move towards the development of green industrial policy, in its many forms. 

The purpose of Green Industrial Policy and Trade: A Tool-Box is to provide an overview of the main families of trade-related green industrial policy tools currently in use, namely border measures, support schemes, standards, sustainable public procurement and manufacturing, environmental clauses in trade agreements, and employment-related schemes, as well as to discuss their relations with the international trade architecture. It is intended as a policy-relevant but not a policy-prescriptive tool-box, and it emphasises, following SDG 17, that trade is an instrument to pursue sustainable development, and not a goal in and of itself. The emphasis of the report is on the many synergies between trade-related policies and sustainable development.

How would you justify the particular structure of the report and the choice of the policy-tools discussed?

The structure was widely discussed with a variety of stakeholders, including external experts, PAGE organisations and other organisations (e.g. people from the WTO). There were two main challenges.

Firstly, “trade-related” green industrial policies are a subset of the broader category of green industrial policies. Whereas it may be easy to define what is “trade-related” in some cases, such as border measures or clauses in trade agreements, there are other areas, such as the wide variety of support schemes or standards, or, still, employment-related schemes, that were not necessarily encompassed by the subset of “trade-related”. In the end, we decided to include them in the report because of their direct and specific relationship with the trade architecture, evidenced by the fact that some are highly regulated by international trade law.

Secondly, there was a typical trade-off between scope and depth. The subset of trade-related green industrial policies covers a vast range of policies, with great variation in the type of specific instruments and their specific implementation across countries. The question was whether to offer a wide-ranging tool-box, providing less detail on each policy, or to discuss a narrower sample of policies, with greater detail. The actual tool-box tries to strike a balance between the two considerations by providing a wide-ranging sample presented in simple and self-contained terms, offering some selected examples (of success but also failure) and providing a list of cherry-picked resources that would allow a country to go into greater detail for any of the policies (and design variations) covered.

Could you elaborate on the main challenges identified and if possible, on the ways in which relevant stakeholders could further engage with green industrial policy?

There are many challenges involved. The first is, of course, to provide a sufficient basis for states and other stakeholders to assess whether sustainability transitions are indeed taking place. If they understand that this is happening and that there is likely no way back, then they will consider how to play within the new playground, often called an inclusive green economy. 

The second is how to play or, in other words, what strategies to adopt to be at the same time competitive as well as socially and environmentally prosperous. The three reports presented by PAGE cover different areas. One provides a wide-ranging analysis of the theoretical foundations of green industrial policy and its main concepts and tools. The other provides guidance on how to organise a green industrial policy strategy at the domestic level, with a focus on the process. The tool-box I developed is an extension of these two other instruments and focuses, specifically, on the tools relevant to trade as an amplifier. It provides a menu for each state to choose and experiment and, eventually, to encourage the role of trade as an amplifier of positive rather than negative effects. 

A third challenge is, as I mentioned earlier, that green industrial policies do not sit comfortably with international trade rules. At present, one can observe three main scenarios in the practice of states: green industrial policies that are unlawful under trade (and perhaps also investment) law and that are being challenged before the relevant fora; green industrial policies that are likely unlawful but that are not being challenged; and green industrial policies that are lawful. The tool-box discusses all three, although it does not use this analytical cartography as its backbone. But it was very important in developing the tool-box to show what’s happening in reality rather than in an idealised world. This tension is challenging because, as I said above, trade and investment (and their law) are only instruments to pursue sustainable development, and not goals in and of themselves. I started to write about these issues 10 years ago and I am happy to see that the mindset is finally starting to change and these issues are becoming mainstream, beyond pro forma acknowledgments and calls for action.

Read Green Industrial Policy and Trade: A Tool-Box > 

Interview by Oana Ichim, PhD Candidate in International Law