From Stockholm+50 to Bretton Woods+80: Greening Trade Law for Global Climate Governance?

1 Introduction

In 2022, Stockholm+50 will commemorate the 1972 United Nations Conference on the Human Environment (also known as the Stockholm Conference) and celebrate 50 years of global environmental action. The Stockholm Conference was the first world conference to make the environment a major issue. The Conference adopted the Stockholm Declaration and Action Plan for the Human Environment and several resolutions. The Stockholm Declaration, which contained 26 principles, placed environmental issues at the forefront of international concerns and marked the start of a dialogue between industrialised and developing countries on the link between economic growth, the pollution of the air, water, and oceans and the well-being of people around the world. A major result of the Stockholm conference was the creation of the United Nations Environment Programme (UNEP). 2 [2].

In 2024, it will also be 80 years, that the 1944 Bretton Woods Conference (formally United Nations Monetary and Financial Conference) was held at Bretton Woods during World War II. The purpose of Bretton Woods was to agree on a system of economic order and international cooperation that would help countries recover from the devastation of the war and foster long-term global growth. 3 . The result was the creation of the International Monetary Fund and the World Bank at the July 1944 Bretton Woods Conference and eventually in 1947, 4 . the signing of the General Agreement on Tariffs and Trade (GATT) in the expectation that it would soon be replaced by a specialised agency of the United Nations (UN) to be called the International Trade Organization (ITO). Although the ITO never materialised, the GATT proved remarkably successful in liberalising world trade over the next five decades. By the late 1980s there were calls for a stronger multilateral organisation to monitor trade and resolve trade disputes. Following the completion of the Uruguay Round (1986–94) of multilateral trade negotiations, the World Trade Organization (WTO) began operations on 1 January 1995. 5 .

Both Stockholm+50 and Bretton Woods+80 will commemorate major achievements and shortfalls. Unfortunately, so far, the two “processes” that were kick-started with the two respective historic events, have so far not corresponded with each other despite their congruent global significance and potential complementarity. This article intends to bridge this historic and systemic gap by asking whether greening international trade in the anthropocene would not be utmost necessary for an improved human environment and global climate governance?

2 Trading in the Anthropocene

Hardly any living creature has changed planet Earth as permanently as mankind, and hardly any other age has shaped it as much as the Anthropocene. Global trade and consumption have played a major role in this. China is building a new Silk Road, nearly 19,000 ships 7 . pass through the Suez Canal every year, and even in the Corona Year 2020, Europe’s largest commercial port in Rotterdam handled 436.8 million 8 . tons of goods. Globalised trade is booming. Since the invention of the steam engine, steamship and railroad, the seemingly endless increase in demand for goods has resulted in ever finer and longer value chains. 9 From raw material producers to processing manufacturers, intermediaries, processors, refiners and sellers, there are often many stations through which the raw material passes to the end product. Moving away from local producers and products to relocations of production abroad and the effective use of economies of scale, almost any product is now available almost anywhere there is a market. Since the 1980s, this has been driven forward by improved information and communication technologies, which made complex production, processing and logistics processes easier to monitor and coordinate. 10 It is not without reason that transportation is one of the fastest growing service sectors of international trade, holding together the unbundling of value chains. 11

3 Environmental and Climate Impacts of Trade

However, products “made in the world” also increasingly lead to considerable climate and environmental impacts. Long transport routes and emission-intensive mining and processing methods, as well as environmentally harmful massive resource extraction, lead to the emission of GHG emissions at every link in the value chain in both the upstream and downstream industries. These GHG are largely responsible for extreme global warming that has occurred since the middle of the 20th century due to their accumulation in and destruction of the earth’s atmosphere. 12 For example, the entire fashion value chain generates around 2.1 billion 13 . metric tons of CO² emissions per year, toxic and radioactive substances are used in rare earth mining, 14 . and in 2018 alone, trade-related maritime shipping was responsible for 1076 metric tons 15 of greenhouse gas emissions. The transportation sector as such was responsible for 23% of total energy-related CO² emissions worldwide in 2010. 16 Lastly, at the end of each product’s life cycle is its entry into the circular economy, which is often accompanied by high emissions as well.

To effectively address this problem, global climate governance demands a holistic approach to drive the decarbonisation of every single emission-intensive step along the value chain. The first and second part of the 6th Assessment Report of the United Nations Intergovernmental Panel on Climate Change (IPCC) published in August 2021 and February 2022 demonstrate with impressively precise data that this must happen quickly and that corresponding measures must be taken on a very ambitious scale - a “code red for humanity” in the words of UN Secretary-General António Guterres. 17 Even if it states that some effects of global warming and in particular extreme weather events are already irreversible. 18 . The temperature increase to be expected will no doubt affect trade in its production, which then needs to be adapted to these consequences. International trade, currently more of a polluter than a climate protector, will therefore increasingly have to face up to its responsibility to protect the human environment and in the interest of the changing climate significantly reduce emissions. Therefore, within and above existing (legal and political) frameworks of networks and partnerships, the WTO needs to play a more decisive role in future global climate governance.

4 Global Climate Governance

When this paper speaks of the WTO as part of “climate governance”, the first step is to identify a tangible definition of the term. The broad term can be roughly divided into two categories. Private-societal climate governance and government climate governance. In both cases, what is meant is the regulation, influence and control of all actors to make their actions more climate-friendly and to counteract climate change. In terms of the private sector and society, a further distinction can be made between two broad categories: the corporate side and citizens’ initiatives and NGOs. In business, private climate governance is carried out through voluntary standards and self-commitments, for example with regard to requirements for suppliers along the supply chain. This is important because legal obligations and voluntary commitments shake hands in this area. The OECD Guidelines for Multinational Enterprises, for example, are not legally binding, nor are the sector-specific due diligence guides that follow on from them. 19 . Nevertheless, on the one hand, they are part of state governance, and, on the other hand, they create reputational and factual pressure to raise a company’s own internal standards.

Legally binding supply chain laws can also have an additional direct influence on private climate governance by providing impetus for companies to voluntarily adopt stricter standards. Civic engagement also takes place in consumer behaviour and preferences, NGOs and initiatives. Protests like Fridays for Future not only put pressure on legislation. Civil engagement also generates pressure on trade, both on the private economy and on organisations like the WTO. Private and public governance therefore influence each other and cannot be viewed in isolation.

5 Scope: The World Trade Law Side of Climate Governance

In this paper, special focus is placed on the interconnectedness of climate governance and world trade law. The question arises whether climate governance under international law is compatible with world trade law at all, or whether these two distinct legal regimes merely coexist, are somewhat at odds with each other or completely incompatible. Yet, it is also conceivable that trade and international trade law can contribute much more to global climate governance with a faster effect due to monetary interests than would be the case outside a direct economic reference. 20 What has, however, become more and more apparent is that effective and binding approaches to decarbonising trade should have been in place since yesterday. In light of this, the ultimate question remains whether world trade law can really “green” trade?

6 Dovetailing WTO Law and Climate Protection

The WTO has been instrumental in paving the way for the existence of products “made in the world” and liberal trade policy by removing trade barriers. As an organisation that was created to ultimately contribute to more economic growth and global prosperity, the WTO was not designed as a climate protection organisation. 21 However, as it is evident today what impact global trade has on the climate, the question arises to what extent the WTO can also flank the UN’s climate governance while global trade law was never meant to promote climate protection.

The mere fact, that trade effects the human environment and its climate must, however, be considered based on the Preamble to the Marrakech Agreement where it is stated that the aim of the agreement is to promote global economic growth “[...] while allowing for the optimal use of the world’s resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment [...]”. 22 These concerns must also be taken into account under the annexed agreements of the General Agreement on Tariffs and Trade (GATT) (for goods), the General Agreement on Trade in Services (GATS) and Trade-Related Aspects of Intellectual Property Rights (TRIPS). 23 . For example, trade-restrictive measures by a state are permissible under the conditions of Art. XX(b, g) GATT by way of exception. This includes measures adopted by a state to protect human, plant or animal life or health or to preserve exhaustible natural resources. The former exception also exists in the GATS, Art. XIV(b) GATS while Art. 27(2) TRIPS allows exceptions to patentability in this sense:

7 Current Developments Within the WTO

While the postponed 12th Ministerial Conference (MC12) of the WTO is expected to take place during June 2022 in Geneva it is promising that a diversity of WTO Members already aim to address more effectively and promote at such occasion dialogue and information sharing on issues where trade, environmental and climate policies intersect, including on circular economy; natural disasters; climate change mitigation and adaptation; fossil fuel subsidies reform; plastic pollution; combatting illegal, unreported and unregulated fishing and ensuring legal and sustainable trade in wildlife; the conservation and sustainable use of biodiversity; sustainable oceans; facilitating access to green technology; sustainable tourism; sustainable agriculture as well as trade in environmental goods and services. 24

(i) Ministerial Statements

The fact that sustainable development and the protection of the environment are fundamental goals of the WTO is emphasised by ministerial declarations published in December 2021, which advocate that the WTO takes its influence on international environmental protection more seriously and to use trade as an instrument for greater sustainability. The Statement on Trade and environmental Sustainability 25 is the result of the Trade and Environmental Sustainability Structured Discussions (TESSD) held during the WTO’s Trade and Environment Week. The TESSD, which counts 71 WTO members as co-sponsors, aims to address dedicated discussions on trade-related climate measures and policies; promoting and facilitating trade in environmental goods and services; achieving a more resource-efficient circular economy; promoting sustainable supply chains and addressing challenges and opportunities arising from the use of sustainability standards and related measures, in particular for developing members challenges and opportunities for sustainable trade - capacity building and technical assistance (Aid for Trade) environmental effects and trade impacts of relevant subsidies. 26 The format of the forum allows for a comprehensive exchange of information on meaningful trade regulations and multidisciplinary approaches to this topic through the involvement of stakeholders and demonstrates how critical the incorporation of sustainability in world trade law actually is, 27 also in promoting Multilateral Environmental Agreements (MEAs, see further below).

The aim of the Statement on Trade and Environmental Sustainability is to use trade to achieve environmental and climate goals and to promote sustainable production and consumption. 28 It is supported by 71 countries, including the US, China, the EU and Japan and the only one of the three declarations to include concrete timelines and actions, such as discussions in the TESSD, where concrete dates for the creation of a work plan are already foreseen. 29 The declaration further aims to explore opportunities for sustainable circular economy and supply chains in addition to environmentally friendly goods. 30

Secondly, the Ministerial Declaration on Plastic Pollution and Environmentally Sustainable Plastics Trade, 31 WTO, WT/MIN(21)/8,. which recognises the impact of plastic pollution on the environment, is supported by 67 countries. Compared to the first statement, the US, for example, are not a supporting member state. It is the result of another round of discussions, the Informal Dialogue on Plastic Pollution and Environmentally Sustainable Plastics Trade (IDP), which was formed by seven WTO members to facilitate the coordination of measures and the contribution of global trade to fight plastic pollution. This statement calls for the development of effective approaches to resource-efficient and environmentally sustainable plastics trade, the sharing of experience in this regard, technical assistance to developing countries on these issues and the reduction of unnecessary plastic products. 32 The fact that this issue is being taken more and more seriously is also reflected by the negotiations recently initiated by the United Nations Environment Assembly (UNEA) on a legally binding global plastics agreement. 33

Lastly, the third declaration on fossil fuel subsidies 34 recognises the importance of the WTO in reducing trade distortions created by fossil fuel subsidies. It declares that the elimination of such subsidies would effectively contribute to the achievement of the temperature targets set forth by the Paris Agreement. 35 These recent developments demonstrate how sustainability and climate change is increasingly moving into the focus of international trade policy, where trade can be seen as part of the solution rather than the problem. 36

(ii) Committee on Trade and Environment

The Committee on Trade and Environment (CTE), which has been in existence since 1994, is of particular importance in the environmental policy role of the WTO. It provides a forum bringing members together for policy dialogue on trade and environment issues 37 and serves as a focal point for information exchange, coordination and cooperation between the WTO and MEAs, including the United Nations Framework Convention on Climate Change (UNFCCC). 38 The CTE examines the effects of environment-related measures on, for example, market access or the TRIPS Agreement, 39 while discussing effects of environmentally protective taxes and technical regulations such as labels or standards on trade. The CTE monitors the relationship between trade law and the MEAs, 40 which expanded mandate was already agreed under the Doha Development Agenda (DDA). 41 Currently, the European Green Deal including the Carbon Border Adjustment Mechanism (CBAM) and the Agreement on Climate Change, Trade and Sustainability (ACCTS), which recently started negotiations, are being discussed in the CTE. 42 In this respect, the CET can be seen as playing a diplomatic role in clearing up ambiguities between members and bringing trade, environment and climate protection more closely together.

(iii) Multilateral Environmental Agreements

The fact that trade and the environment are intrinsically interlinked is demonstrated by numerous MEAs. Many of these agreements have a direct impact on trade, for example by prohibiting trade in certain goods or imposing environmental requirements on goods. This can be done through import or export restrictions, certification and notification systems, or control of subsidies. Here, too, the question arises to what extent world trade law allows this contribution to greener trade. The DDA established the basic principle of mutual supportiveness, according to which trade and the environment should promote each other synergistically. 43 For this purpose, the MEA secretariats and the CET are in close exchange with each other. 44 In this way, possible conflicts with WTO law, in particular with the prohibition of discrimination or the prohibition of quantitative restrictions, can be balanced out. At the legal collision level, it should be noted that sectoral tensions, such as between environmental/climate law and economic law, can be resolved in two ways. On the one hand, through practical concordance, as described here by the mutually reinforcing effect. On the other hand, the separation of the areas of protection of both legal regimes is in principle an effective means of avoiding collisions. 45 The example of chemicals law and patent protection illustrates this: The latter protects exploitation by excluding third parties from it but does not guarantee it. 46 The exploitation itself must comply with other legal regimes, such as chemicals law.

8 Opportunities for Contribution to Climate Protection

Can trade and the WTO really be part of the solution to climate change? 47 The extent to which this is the case can be shown by different approaches to environmental law that pursue the integration of climate and environmental protection into world trade law. First, a WTO climate waiver to simplify the promotion of climate friendly goods. Second, there are two initiatives which, as multilateral agreements, are supposed to be the first of their kind to specifically link climate or environmental protection and trade. These are, first, the Environmental Goods Agreement (EGA) negotiated under the WTO and, second, the Agreement on Climate Change, Trade and Sustainability (ACCTS) initiated outside the WTO. Lastly, free trade itself offers opportunities to contribute to a greener economy.

(i) Climate Waiver

One option to resolve the undoubted tensions between free trade and climate protection are so-called climate-waivers. Legally as an exceptional measure in the sense of Art. IX:3 WTO Agreement, they have great potential to quickly make trade greener. A waiver would mean that states could take advantage of the possibility of environmentally protective trade measures that would be incompatible with WTO rules without such waiver. 48 This would have the advantage that the WTO rules could remain untouched and would not have to be revised. 49 It should be noted that according to Art. IX:4, the waiver could be designed for a maximum of one year, whereby the Ministerial Conference can decide on an extension and thus a revision. The acute challenges of climate change could constitute exceptional circumstances within the meaning of Art. IX:3. The aim would be to make measures that discriminate against goods on the basis of their greenhouse gas footprint possible and thus promote carbon pricing. 50 . Taxes on carbon could be understood as border tax adjustments in the derogation. At best, the measures should meet the definition of a climate measure to prevent disguised trade restrictions. 51 Moreover, such waivers should not isolate developing countries from global trade by making the “good” discrimination work to their disadvantage. 52 From a practical point of view, an agreement on such waivers seems rather difficult regarding the few far-reaching waivers that exist. 53

(ii) Environmental Goods Agreement

In 2014, 18 WTO members, consisting of 17 countries and the EU, started negotiations for an EGA. 54 This is intended to abolish tariffs for certain environmentally relevant products so that the environment, trade and development benefit as it was set as the goal of the Doha Round. 55 This should make them more affordable and increase innovation through more competition. 56 Environmentally relevant products should include key technologies that are useful for achieving the climate goals of the countries and for mitigating GHG emissions. 57 These include, for example, goods such as solar panels and wind turbines that serve to generate renewable energy, those that improve energy efficiency, and those that make the circular economy more climate-friendly. 58 The agreement is to be made very legally binding and the results after the conclusion of the negotiations, in particular the negotiated economic benefits, are to be shared by all WTO members. 59 However, since the last round of negotiations in 2016, the EGA appears to have fallen asleep, and negotiations have not continued since then. Currently, the continuation is also not officially pending. The possible failure of the EGA could be due to the planned binding nature of the agreement, as well as the conflicting interests of the many negotiating countries. 60 The countries are currently missing an opportunity to push the green economy considerably through trade measures. Such measures can also be adopted on a smaller scale, but the effect would be much more effective with an agreement that applies to all WTO member states.

(iii) Agreement on Climate Change, Trade and Sustainability

The initiative for the ACCTS, a new MEA, for example, shows that green trade is becoming more widely recognised by countries and holds opportunities to generate economic growth in an ecological way. This would be the first trade-related agreement to focus exclusively on climate change and sustainable development. The progressive initiative was launched by five rather small states that are not major GHG emitters. 61 However, should additional and large countries with higher GHG emissions join the negotiations, the agreement would represent a major step towards greener, decarbonised trade. 62 Among other things, the agreement shall include binding rules to eliminate fossil fuel subsidies and develop guidelines for eco-labelling processes. 63 In addition, trade barriers regarding trade in environmental goods and services are to be abolished at the same time, which would also be a novelty. 64

(iv) Additional Considerations

More generally, free trade promoted by world trade law can also contribute to greater climate protection. Uncomplicated market access promotes innovation and can thus lead to technical spill over effects. For example, the availability of energy-saving products can be made more global, thus enabling the widespread use of efficient technologies. 65 However, it is not enough to trade the relevant goods and know-how; technologies must also be transferred to enable independent use in developing countries. A distribution based purely on market mechanisms and thus financial incentives will thus occur through trade, but hardly to a sufficient extent. 66

There are great opportunities here, especially in the energy market. Industrialised countries in particular could transfer technologies to developing countries, so that the ultimate goal is for trade in renewable energy to flourish from countries where it is available in large quantities to those that need energy. 67 In this way, the potential of renewable energies would be better exploited, and trade could promote the replacement of fossil energies. 68 In fact, the 2022 Ukraine conflict also deepened the discussion on “how the global addiction to fossil fuels is placing energy security, climate action and the entire global economy at the mercy of geopolitics.” 69 As the EU and Russia reorientate their energy trade patterns to break their mutual dependency, the issue of trade in energy covered by the WTO may need to adjust to a future landscape that needs to increasingly address the question of energy security, where gaps and interests of energy deficit and energy surplus must be balanced.

Furthermore, free trade also contributes to simplifying adaptation. Especially with regard to food security, which threatens to become increasingly critical in the future, open market access is important in order to be able to guarantee supplies. 70 But: international trade, while essential for food security 71 for instance, also creates vulnerabilities through supply disruptions, growing unilateralism and competition especially over agricultural resources that can be both a cause and a consequence of geopolitical rivalry. 72 Agricultural trade can play a role in responding and adapting to climate change, including by contributing to market stabilisation and by reallocating food from surplus to deficit regions. 73

Agricultural commodities trade is subject to drastic changes, reflecting the uneven and disproportionate impact of climate change on agricultural sectors across the globe. With the ongoing conflict in Ukraine, we see an alarming example on how food availability can easily be threatened in a trade system that encourages import dependence and export-oriented agriculture, but cannot require countries to export food, which could be detrimental to countries that depend on imported food.

Whereas the UNFCCC does not explicitly provide for specific trade measures, the parties to the Paris Agreement explicitly recognise the fundamental priority of safeguarding food security and ending hunger, and the vulnerabilities of food production systems to the adverse impacts of climate change, while Art. 2(1)(b) of the Paris Agreement provides for

Where sufficient space for policy discussions needs to be pursued at the intersection of the WTO and the Paris Agreement, we need to identify transformative policies for climate change adaptation and mitigation to make agriculture meet contemporary challenges. 74 How can the WTO trading system help with the implementation of the Paris Climate Agreement, mitigate climate change and contribute to food security? The WTO has tremendous potential to contribute to decarbonisation and, relatedly, has significant potential to help mitigate climate change. This hypothesis raises the question: How can progressive trade liberalisation be reconciled with the protection of non-economic interests where the trading system can contribute to mitigating climate change, shifting from trade as a major cause of environmental harm to trade as a tool for environmental protection? And what does this mean for the promotion of food security in the context of climate change, which is likely to affect agricultural production more and more across various sectors? 75 We need to find effective answers to these questions and in the words of UN Secretary-General António Guterres “we must do everything possible to avert a hurricane of hunger and a meltdown of the global food system”. 76

The legal framework of the WTO also promotes contributions to climate protection through the dismantling of trade barriers alone, but it must be politically adjusted in such a way that the possible effects are not prevented by purely monetary interests. At the same time, this potential therefore entails the risk of conflicting goals. These can be counteracted in the globalised world and in the asymmetric enforcement potential of law by including sustainability clauses in agreements by states that envisage more progressive climate protection measures. 77 This can help ensuring that the outsourced economy does not take on exploitative dimensions with less stringent regulation. 78

9 WTO and Carbon Border Tax

As a national measure, the carbon border tax does not fall directly under the auspices of global climate governance, but it is nevertheless a direct result of the common climate goals and is intended to contribute to the mitigation of emissions as a measure under trade law. Behind the mechanism is the goal of pricing the carbon emissions inherent in a product. On the level of world trade law, it is questionable to what extent such taxes are compatible with WTO law. Due to the detailed nature of tax and customs issues, the following is merely an overview of possible collisions with the GATT and the compatibility with its principles.

Carbon border taxes could have a negative impact on free trade by being misused as a protectionist measure. 79 This could fuel trade conflicts and disrupt global value chains. In principle, it should be noted that the GATT, pursuant to Art. II:1(a) does not permit the exceeding of fixed tariff rates, other forms of charges on goods when crossing borders violate Art. II:1(b) also violate the GATT. However, anti-dumping duties do allow additional burdens at the border, provided “dumping” as defined by the GATT, i.e., the difference in price of a good between the exporting country and the export price.

The fact that production costs are cheaper in one country than they are in a country with corresponding measures due to the lack of environmental measures taken is therefore not to be assessed as dumping. 80 Accordingly, carbon taxes cannot be regarded as a permitted restriction on trade under Art. 6:1(a) GATT. Nor are carbon border taxes permitted under GATT rules as countervailing duties based on subsidies, cf. Art. VI:3 GATT. This would require the exporting country to forego revenue, which is not the case for climate protection measures that simply do not exist in the exporting country. 81 Climate protection tariffs are not compatible with world trade law. So-called carbon border tax adjustments are therefore under discussion as a form of trade-related environmental measures (TREMs). In this case, CO² emissions are priced using emissions certificates. An importer must either present these at the border in accordance with the emissions of his/her goods or pay an amount corresponding to the emission certificates that would have been necessary for domestic production. 82 Thus, domestically produced goods should not be subject to heavier burdens than foreign imported goods. 83 Under WTO law, this border adjustment would be possible under GATT, Art. II:2(a) in connection with Art. III:2. 84

While the border adjustment neither restricts imports nor exports of products, nor leads to quantitative restrictions, there is no violation of Art. XI GATT and the prohibition of non-tariff trade barriers. 85 The carbon adjustment can also be designed in accordance with the prohibition of discrimination (most-favoured nation principle and national treatment) for which certain adjusting screws must be turned. It should be noted that the EU, for example, plans to use Border Carbon Adjustments (CBAs) based on the manufacturing process of a product. This means that the production costs will be higher due to the certificates to be acquired and the associated border adjustment. The following therefore deals with measures based on the environmentally harmful production and not on the environmentally harmful product itself, although CBAs are in principle worth discussing for both categories. 86

In order to ensure equal national treatment, there is the “classic” problem of assessing like-products under world trade law. Since this does not exclusively concern CBAs, it will only be addressed in the context of the specific issues. As regards the general assessment of likeness, it should only be said that this is basically based on nature, properties, quality, consumer preferences and use options, and that environmental risks can play a role in this assessment. 87 It remains questionable for CBAs whether the environmental compatibility of manufacturing registers can have an influence on the likeness of the end product. However, according to US-Shrimp 88 and US-Restrictions on Imports of Tuna, 89 a large influence of manufacturing processes on end-product likeness tends to be rejected. This is also supported by the fact that border tax equalisation is supposed to have a competition-preserving effect, which would not have to be an objective in the case of dissimilarity between environmentally friendly and environmentally harmful products. 90 Finally, it should be noted that the development of consumer preference as a criterion of similarity must be further observed. People’s growing awareness of products manufactured in a climate- and environmentally friendly manner could lead to this possibly being given greater weight in the assessment of likeness in the future. 91

Far more interesting in regards of national treatment is that taxes at the borders must correspond to the actual carbon footprint. The functioning of the mechanism depends on this technical issue. To be able to determine this as uniformly as possible globally, the carbon footprint is determined based on a benchmark. The so-called Best Available Technology (BAT) benchmark refers to the most resource-efficient production technology and the resulting emissions. 92 Although actual individual emissions are not calculated, the same emissions measurement applies to every importer. 93 For producers disadvantaged in this way, the possibility of individual emissions verification could serve as compensation in order to be able to price less emissions-intensive imports accordingly. In this case, only the administrative implementation of the carbon border adjustment would be costly. Here, it must be clarified which countries are to be included in the mechanism, how a uniform calculation can be made, and how BAT-benchmarks can be developed for as many production sectors as possible.

Violation of the Most-Favoured-Nation (MFN) Principle must also be avoided. This means that no distinction may be made according to whether another state has implemented certain environmental measures, as this would constitute a discriminatory origin linkage. 94 The starting point must always be the compensation of product-related costs that would be incurred domestically in terms of emissions offsetting. A uniform BAT-benchmark process also serves this purpose. In addition, it would have to be ensured under tax law that no double taxation occurs. Pricing the carbon footprint is thus possible in the form of a CBA under world trade law, provided that the requirements outlined above are met.

10 WTO and Labelling

Labelling is another governance approach that can contribute to climate protection by informing consumers about certain characteristics of a product. A distinction should be made between governmental labels, labels of professional institutions that are linked to a sector of the economy and companies’ own marketing labels. There is a particularly large number of agricultural organic labels that provide information on pesticide use and cultivation methods, as well as those that declare sustainable timber management. In addition to these environmental labels, some countries are also considering the introduction of climate or CO² labels that would indicate the CO² footprint of a product. Initiatives exist in Europe and North America, for example the “Carbonfund” in the US or the originally British “Carbon Trust”.

Here too, however, there are legal frictions in relation to free trade, as shown for example by the US-Shrimp 95 or US-Restrictions on Imports of Tuna 96 cases. Eco-labelling can act as a protectionist measure and disadvantage weaker economic actors, especially if a comprehensive life cycle analysis of the product is the basis for certification. 97 Accordingly, they are only compatible with world trade law if they are voluntary, market-based and transparent and include all producers along the value chain. 98 Labels can also constitute technical barriers to trade and are thus covered by the Agreement on Technical Barriers on Trade (TBT) in addition to the CET and discussed by its committee. The agreement provides for standards for mandatory and non-mandatory environmental labelling; for voluntary environmental labelling there is the Code of Good Practice for the Preparation, Adoption and Application of Standards, which serves as a guideline for the design of labels in conformity with global trade law and is closely linked to the ISO/IEC standardisation institutes. 99 However, the tension with the TBT could be resolved, for example, by increasingly including labels in the agreement and thus no longer being considered a trade barrier in its sense. 100

11 Better Trade for Better Globalisation?

In a recent statement, WTO Director General Okonjo-Iweala noted “sustainable development was a goal written into the WTO’s founding agreements in 1994”, and that exciting initiatives are underway at the WTO to respond to sustainability challenges such as plastics pollution and climate change. She sees a “better answer to the real problems in better trade – in a better globalisation, or, as she terms it, a re-globalization – one that brings marginalized people and countries into the economic mainstream, while helping us decouple human well-being from environmental impact. She advocates for “different ways trade can contribute to curbing climate change, while ensuring a just transition for the countries that did the least to contribute to the problem”. 101

It is in light of the aforementioned discussions and the statement of the DG worth to highlight the pressure that global trade law could exert on a more climate-friendly, innovative economy. But how can this gap be bridged? In different contexts, scholars have identified anticipation, reflexivity, inclusion and responsiveness as important characteristics of increased responsivity. 102 While anticipation involves systematic thinking aimed at increasing resilience, reflexivity, at the level of institutional practice, means holding a mirror up to one’s own activities, commitments and assumptions, being aware of the limits of knowledge and being mindful that a particular framing of an issue may not be universally held. Inclusion could mean taking the time to connect different stakeholders (UN and WTO) as to lay bare the different systemic impacts on different communities with a rresponsiveness to change shape or direction in changing circumstances. The precautionary principle should connect to these four dimensions giving direction to the future of international trade and global climate governance. It has been stated, that “the multilateral trading system had to be reduced to a single sentence, it might be this: it receives its inspiration from economists and is shaped primarily by lawyers, but it must operate within the limits that the politicians set”. 103 What is, however, missing here are both the human and natural elements that should guide the aforementioned inspiration.

While the trading system is undergoing a serious stress test, its future shape will be determined by the shifting definition of what trade means. This is spurred by disagreements over competition policy, international investment, currencies and international trade, trade finance, labour, climate change and trade, corruption and integrity, aid for trade, and the coherence of international economic rules. 104 Not only can the WTO sometimes come into conflict with UN bodies that deal with issues related to trade. 105 The failure to conclude the first multilateral round of the DDA already had serious consequences, while the global economy has changed substantially in recent decades. The trading system needs to be made fit for the future and the current crisis offers such opportunity. Hopefully it will become a step in a transition towards a multilateral trade regime that is more adapted to the world of today and particularly the most pressing problems of tomorrow. 106 By recognising the importance of multilateralism in tackling the Earth’s triple planetary crisis – climate, nature, and pollution – there is a need to link international trade to the Sustainable Development Goals (SDGs), including the Paris Agreement on climate change, the post-2020 global Biodiversity Framework, and encourage the adoption of green post-COVID-19 recovery plans. 107 .

There are already numerous promising initiatives in this regard, all of which aim to promote trade in environmentally friendly goods and thus innovation in this area. This can only happen with preferential treatment for these goods. A climate waiver that temporarily relieves WTO members from their legal obligations under the WTO agreements when pursuing climate action would certainly be the most comprehensive approach with the greatest effect, as it de facto allows discrimination against goods that have a high GHG footprint. Of course, this would also be accompanied by practical regulatory difficulties, especially because the same economic pressure should not be exerted on developing countries as on industrialised countries. However, this should not be the reason for not advancing innovative solutions in world trade law.

In the context of the emissions-intensive cement industry, for example, the 10 largest exporting countries include only one Lower Middle-Income Country (Vietnam) and no Least-Developed Country (LDC) or Low-Income Country. 108 Climate waivers would deprive world trade law of its function as a bulwark of free trade because of the exemption rule, which must be revised again and again. The negotiations on the EGA should be resumed as a matter of urgency because there is already a negotiating forum for this and thus at least a willingness to reach consensus. In this respect, the question of whether international climate law can make trade greener can be answered with a yes, it can certainly contribute to this. And although world trade law is in a certain tension with environmental and climate protection, it is not the decisive factor why the latter is implemented too slowly. Climate protection is economically profitable and by no means an obstacle to trade per se. However, international law can only be as good as the political will that creates it.

12 Conclusion

The global trading system established as a response to Bretton Woods, and more so with the establishment of the WTO, the international community envisioned a single set of global trade rules enforced by an effective multilateral dispute settlement system. While this has never fully materialised, the question whether the rules of the WTO from the 1990s are still compatible with the reality of the 21st century remains open. 109

WTO members should increase efforts through the international architecture to develop green trade agreements that facilitate and incentivise increased trade in commodities produced without conversion of natural habitats. 110 Yet, WTO reform to better accommodate climate change measures is largely still work in progress. Climate governance is largely still relegated to diplomacy, which depends on political agendas and thus elections. This inherent weakness of the system is reflected in vague formulations, such as those made in the current ministerial statements. Furthermore, the promising instrument of emissions trading, is far too little in the foreground of international climate governance negotiations and the WTO agenda. Globally accepted mechanisms would help to make the price tag given to GHG emissions in some places more internationally significant and promote savings projects worldwide. 111

The needed reform should entail legal changes, namely amending the WTO agreements to accommodate climate change measures; introducing the climate waiver; adopting an authoritative interpretation clarifying the scope of WTO rules in relation to climate policies; and introducing a time-limited peace clause pursuant to which WTO members will not challenge the climate policies of other members. A willingness to address this has been signalled by some WTO member states with the ministerial declarations on sustainability, plastic pollution, and fossil fuels. It is desirable and not improbable that the content of these declarations will continue to set the ball rolling for trade sustainability at the international level and herald the long-awaited hot phase for this. However, to really create a new dynamic in world trade law, it would be essential to specify the contents of the ministerial declarations and back them up with concrete timetables and measures.

Large emerging economies such as India or South Africa must be brought on board to ensure the effectiveness of the possible measures on the one hand and free world trade on a global and not fragmentary basis on the other. India had made it known in connection with the ministerial declarations that environmental protection must not become a pretext for enforcing illicit trade barriers and that the WTO had no mandate for international environmental policy. 112

COVID-19 raised the awareness levels of policymakers to ways in which global governance systems may be vulnerable to sudden shocks. 113 This offers a glimmer of hope in terms of more ambitious implementation of international environmental policy and a willingness on the part of the global community to reach consensus. In the interest of global climate governance and for the sake of the human environment, the challenge will be to bridge the gap where measures to protect the environment, or such claiming to implement the Paris mitigation commitments collide with present trade rules. Sustainable and green trade must be of common concern for humankind and shape political priorities. 114 This in turn will require more commitment to overcome substantial barriers at various institutional (and conceptual) levels as well as adequate and corresponding regulatory frameworks. 115 The absence of such commitment could reinforce some of the bottlenecks that delay the achievement of a wide range of SDGs, including SDG 13 on climate change. And while we must bring trade and environmental policies closer together, reducing barriers to trade in goods and services can help to make production and consumption greener and more sustainable. 116 Ultimately, trade is of course only one of the solutions.

In the midst of the COVID-19 pandemic we - among other things no doubt - started to ask ourselves more seriously, what will happen when the pandemic is overcome while this will most certainly not be the status quo ante. 117 Inspiringly, Indira Gandhi, the late Prime Minister of India, in her speech on ‘Man and Environment’ during the Plenary Session of United Nations Conference on Human Environment, Stockholm on 14 June 1972 inter alia stated as follows:

In this light, the better protection of the human environment and a transition to climate neutrality and decarbonisation should be guided by the leitmotiv to place the greening of trade and development at the centre of all future economic policy. Today, 50 years after the Stockholm Conference, it is important to assess where we stand and what still needs to be done. It may be relatively innocuous to agree on a least common denominator regarding the late Prime Minister of Sweden Olof Palme’s statement in his historic speech during the Plenary Session of the United Nations Conference on Human Environment where he stated:

Similarly, almost 80 years after Bretton Woods, we equally need to assess where we stand and what still needs to be done in terms of the economic order. On 22 July 1944, in his closing address, Henry Morgenthau, Jr, then US Secretary of the Treasury and Chairman of the Bretton Woods Conference, said that

In the same speech he called for a “revival of international trade”, that “will permit the realization of men’s reasonable hopes”. 118 It is exactly in this hope, this article humbly aims to contribute a fragmented attempt to bridge the ‘conceptual apartheid’ in the multilateral order between international trade law, the protection of the human environment and global climate governance. This hope is exacerbated by the experience of more than 2 years of COVID-19, which stifled the global economy, a raging war in Ukraine and the looming Russian threat of World War III, which holds more than a warning for the existing world order. It has in this light been rightfully stated that the Ukraine can be “viewed as a test for the survival of a 75-year-old idea: that liberal democracy [...] and free trade can create the conditions for peace and global prosperity”. 119

Lastly, and with regard to a greener and more sustainable common future, it will – mutatis mutandis – still need to be seen how we can avoid instability, conflict and wars in times of growing transformative energy insecurity, climate injustice and environmental distress coupled with accelerating complexity dynamics and emerging trade patterns that shape the future global agenda, not only in light of ‘Stockholm+50’ but also on the way ahead to ‘Bretton Woods+80’.