Climate Change and the Trading System: Implications of the Trans-Pacific Partnership

Abstract

This paper considers the implications of the shift of trade rule-making and liberalization from the World Trade Organization (WTO) to the mega-regional mode for the development of responses to climate change. We review developments at the interface between the trade system and climate change responses at the national, sub-national, corporate, and civil society levels, and evaluate the impact of the environmental provisions in the Trans Pacific Partnership (TPP) agreement. We find that the shift of the main action in trade negotiations into the mega-regional forums is not a positive development for action on climate change. Effective action will be multilateral in scope, collective in nature, and policy-activist in design. From the perspective of interaction with trade rules, the coordinated industrial policies required to deliver a sustainable economy will likely require sanction under a multilateral environmental agreement. Armed with such an agreement, the WTO’s dispute settlement mechanism could safeguard policy space while settling disputes. The mega-regionals will generate a system unfriendly to climate change policy, as they are plurilateral and exclusionary in scope, competitive in nature, and policy-restrictive in design. Moreover, they are leading in the development of investment and competition regimes that the WTO lacks. These latter regimes, which are increasingly important due to the high degree of trade and investment integration in the modern global economy, will be given teeth by investor-state dispute settlement mechanisms within the agreements. This militates against the evolution of a coherent and transparent body of climate-policy-friendly case law, which would be more likely under a WTO regime. Perhaps most importantly, as the weak outcome of the TPP shows, they are likely to use up trade negotiating coin without contributing to climate change responses.

Keywords: climate change, mega-regionals, UNFCC, dispute settlement, industrial policy, WTO, TPP, TTIP, TISA, RCEP

JEL Classification: F13