Monday, July 26, 2010

WTO and natural resource cooperation

I could have called this post - "globalisation and the environment".

Next week I will be lecturing to Chevening scholars on "Climate Change, Trade and Development" that will consider the increasingly complex relationship between trade negotiations and environmental post 2012 negotiations.

How much overlap is there? Should there be any overlap?

The Doha round needs a considerable section on environmental compliance given the increasing use of environmental regulations that act as "secondary trade barriers". The WTO is central to progress in this area.

A forthcoming World Bank report by De Melo and Mathys will look at this issue is much more detail.

It is interesting therefore to see that WTO pushing forward on this issue.

WTO Seeks More Cooperation In Natural Resource Trade [PlanetArk]
The World Trade Organization called on Friday for countries to work together more closely in trade in natural resources -- an area often seen as exempt from many international commerce rules.

Governments must cooperate more intensively to deal with the challenges for both importing and exporting countries in trade in natural resources, such as export restrictions and import tariffs, it said in its annual World Trade Report.

"In a world where scarce natural resource endowments must be nurtured and managed with care, uncooperative trade policies could have a particularly damaging effect on global welfare," the report said.

The report defines natural resources as fuels, forestry, mining and fisheries -- goods that are found naturally and can be used with minimal processing. It excludes agriculture, where products are cultivated not extracted, and industrial goods employing minerals that require a high level of processing.

Trade in such goods in 2008 was $3.7 trillion in 2008, or nearly 24 percent of total world trade in merchandise goods, a share that has been rising by 20 percent a year for the last decade, reflecting rising commodity prices.

"I believe not only that there is room for mutually beneficial negotiating trade-offs that encompass natural resources trade, but also that a failure to address these issues could be a recipe for a growing tension in international trade relations," WTO Director-General Pascal Lamy said in a foreword to the report.


WTO rules allow countries to restrict exports of natural resources to preserve an exhaustible resource.

Zhao Hong, a diplomat at China's mission to the WTO, said at the launch of the report in Geneva that WTO members had inalienable rights to the resources on their territory, while WTO rules allowed them to pursue goals such as environmental protection or sustainable development.

The United States, European Union and Mexico have complained to the WTO about China's restrictions on raw materials, and the WTO itself has questioned whether these are effective.

Such restrictions, as well as measures by importing countries, are open to legal challenge, said Joost Pauwelyn, professor of international law at Geneva's Graduate Institute for International Studies.

It was an "urban myth" that natural resources are not covered by the WTO, he said at the launch.

For instance a country could not claim to use export restrictions to preserve resources if it did not restrict domestic consumption.

Similarly production restrictions by a country that exports almost its entire output of a natural resource could be challenged as an export restraint, while consumption taxes on a country that relies on imports for a product could be seen as tariff open to challenge.

Still, trade in natural resources is not the same as other products, as it raises environmental issues and competition is limited as production cannot be switched to other locations.

"Natural resources and energy are unevenly distributed between countries as well as fixed. BP will confirm this: you cannot move an oil well," Pauwelyn said.

Pauwelyn said he could envisage negotiations where exporters agreed to curb their export restraints in exchange for importers limiting carbon tariffs.

The report shows that non-WTO member Russia was the biggest exporter of natural resources in 2008, with a value of $341 billion, while the United States is the biggest importer, taking in $583 billion.


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