WTO meeting highlights Aid for Trade‘s role to support green economy, despite scepticism from developing countries

7 March 2012

"Aid for Trade contributes to sustainable development, though much more needs to be done to make green growth a reality," concluded Anthony Mothae Maruping, Ambassador from Lesotho and Chair of the WTO Committee on Trade and Development (CTD) in a workshop on Aid for Trade (AfT) held on the 29th of February.

During the meeting, WTO members and representatives of other international organizations examined the contribution of AfT to sustainable development and a green economy, in particular for least-developed countries (LDCs).  The United Nations Environment Programme (UNEP) broadly defines a green economy as an economy that results in improved human well-being and social equality over the long term, without exposing future generations to significant environmental risks and ecological scarcities.

The workshop was set against the backdrop of the United Nations Conference on Sustainable Development to be held in June 2012 in Rio de Janeiro (known as Rio +20) on a similar theme.

Complex relationship between trade and environment

One idea that emerged from the discussions is that trade can impact environment but environment can also impact trade.

Many panellists highlighted the necessary link between trade and sustainable development to achieve sustained growth. However, they also stressed the challenges posed by the financial and technical costs of a transition to a green economy, especially for LDCs.  In this particular regard, AfT was presented as a possible tool to finance a transition towards a green economy; a tool which has started to show results in practice.

A guiding principle of AfT is that it "should be rendered in a coherent manner taking full account of the overall goal of sustainable development" as specified the background note of the workshop.  The AfT initiative began seven years ago at the WTO Ministerial in Hong Kong, with the goal of helping developing countries, particularly LDCs, develop the trade related skills and infrastructure needed to take greater part in international trade.  Typical examples of AfT projects with environmental objectives include trade related infrastructure projects in the area of transport energy and water but also training, institutional and business support.

"Environmental goals and economic growth do not have to contradict each other," stated the OECD representative, William Hynes.  "A possible avenue to assist in the transition to green growth is through AfT programmes aimed at increasing the participation of poorer developing countries in international trade" he said.  OECD data on AfT flows confirms this synergy, with some 30 percent of aid for economic infrastructure contributing to "environmental objectives".

Based on two projects conducted in Honduras and Guatemala, Denmark representative Sofie Flensborg noted that involving national implementing agencies, and ensuring the commercial viability of green enterprises are crucial success drivers for green growth objectives in national development policies. She also stressed the complementarity between AfT and environmental funds and the necessity to envision both trade and green objectives in the design of projects.

Green measures should not be "green barriers"

WTO director of trade and environment, Vesile Kulaçoğlu, underlined that environmental policies taken by governments have become broader and therefore the risk of affecting trade is also higher.  Thus, she warned against "green protectionism".

For example, countries may see green measures as an additional burden on their industries and a threat to their competitiveness. They may then react through trade measures. However, she stated that WTO rules, such as GATT article XX, would act as safeguards against green measures applied arbitrarily and constituting disguised forms of protectionism.

Cost of transformation to green economy too high for LDCs

According to Anna Autio from the UNEP, LDCs are well positioned to transition into a green economy given their low carbon profile and their abundance in natural resources.  Additionally, governments have a central role to play in setting up strategies, targeting public spending, and furthering private sector participation for this transition to occur.

"Bringing energy to the rural poor is one of the most important contributions that a green economy can make to LDCs economies" she added.

Benin said that the WTO should facilitate the elimination of distorting trade practices related to environment that are "incompatible with sustainable development".  "It is important to avoid creating new trade barriers, imposing new conditions to aid, and deepening the technological gap between developed countries and developing countries" he concluded.

Angola and Oman raised the issue of seeking energy conservation in countries that already suffer from energy crises, and the high costs related to the transformation into a green economy.

Pakistan expressed concerns regarding the absence of clear guidelines that would provide incentives for technological transfers in the context of green economy.

In his concluding remarks the Ambassador from Lesotho, Anthony Mothae Maruping, underlined that LDCs are indeed well placed to adapt to a green economy, but like other developing countries, they are inhibited by the costs of such adjustments and lack of access to technologies.

Prospects for a multilateral framework on green economy

A recent analysis published by the International Relations and Security Network - an online information access provider on international relations and security funded by the Swiss Government - concluded that tensions are likely to be felt at the next Rio +20 in June given the mixed feelings on the subject of green economies, which developing countries fear could affect their comparative advantage.  Most developing countries seem to be in favour of green economies that would encompass the various levels of economic developments found in different countries and respect the policy space of each country to define their own paths towards sustainability.

ICTSD  reporting.

Source: Green Economics and the Rise of the Rest, 8 February 2012, ISN ; Workshop Background note and podcasts available online here

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