On 15 December 2021, in a historic first, members the World Trade Organization (WTO) launched three high-level ministerial statements recognizing the nexus of international trade and trade policy and the environment. The ministerial statements call for the global trade body to support climate action, fossil fuel subsidy reforms, and measures to reduce plastics pollution of land and seas.
These statements are a culmination of the latest environment relevant initiatives at the WTO, namely ‘TESSD’, ‘IDP’ and ‘ACCTS’ (elaborated later in the article) and form part of a wider momentum in the international trade and environment discussions gearing towards a multilateral trade and environment agenda 2.0, one which keeps up with the realities of a world facing the triple planetary crises, while struggling to emerge from a global pandemic, in a manner that leaves no one behind.
Here is our listing of the top 5 highlights for trade and environment from 2021.
1. Major economic and political fora committed to reducing negative impact of trade on environment
Compared to 2019 and 2020, the major economic and political groupings such as G7 and G20 saw an increase in the discussions surrounding the acknowledgement of the environmental impacts of international trade, and commitments to reducing negative trade impacts on the environment. Key highlights from the G7 and G20 communiqués relevant to trade and environment are summarised in Table 1 & 2.
As the tables 1 & 2 show, in 2021, the G20 communiqués recognize, for the first time, that international trade can have negative impacts on the environment. The G7 member states went even further in their communiqués and committed themselves to reduce the negative impacts of trade on the environment in selected sectors, primarily in energy and agriculture.
2. Key consumer countries tabled national and regional trade policy agendas
Reflective of the trends observed in the G7 and G20 fora, some key consumer countries introduced national and regional level policies in 2021 that are hoped to result in substantially positive environmental outcomes.
In February 2021, the European Commission published a revised trade policy. This policy underlines the importance of environmental priorities to the EU trade agenda. While there are different views on whether the new EU policy is sufficiently ambitious on the environmental front, it reflects the increasing demand to use trade policy as a vehicle for strengthening environmental performance. Based on this, the EU actions will focus on, among other things:
- Updating WTO rules and practices to reflect today’s trade realities such as launching a trade and climate initiative at the WTO.
- Ensuring that there is an ambitious sustainability chapter in all EU bilateral trade and investment agreements, by for example, ensuring that trade and investment agreements with G20 countries are concluded on a common ambition to achieve climate neutrality, promoting sustainable and responsible value chains through a proposal on mandatory due diligence.
In November 2021 the European Commission proposed a law aimed at preventing the import of commodities linked to deforestation by requiring companies to prove their global supply chains are not contributing to the destruction of forests. The law sets mandatory due diligence rules for importers into the EU of soy, beef, palm oil, wood, cocoa and coffee, and some derived products including leather, chocolate, and furniture.
If the law is approved by the EU governments and the European parliament, companies operating in the 27-nation EU will have to show
- the commodities specified were produced in accordance with the laws of the producing country.
- the commodities were not grown on any land deforested or degraded after December 31, 2020, even if it is legal to produce there according to producing country law.
The Commission hopes the law will be passed by 2023, with large companies given a 12-month grace period to comply and smaller ones a 24-month grace period.
Similarly, earlier in 2021, the UK launched consultations to tackle illegal deforestation through new measures in the Environment Act. The proposed measures will make it illegal for larger businesses in the UK to use commodities whose production is associated with large-scale forest loss such as cocoa, beef, soy, coffee, maize and palm oil, where they have not been produced in line with relevant local laws. As it is understood, the law stands one notch below the EU proposal, which does not limit the scope to large businesses, and specifies a deadline of December 2020 after which any new deforestation, even if compliant with local laws will not be tolerated.
The United States’ administration committed in its trade policy agenda 2021 to work with other countries, both bilaterally and multilaterally, towards environmental sustainability and raising global climate ambition. The US trade agenda will include the negotiation and implementation of strong environmental standards that are critical to a sustainable climate pathway. There have also been attempts in the Senate to introduce a framework for the federal government to deter commodity-driven illegal deforestation around the world.
Worldwide, a range of other developed countries that include Canada, New Zealand, Norway, and Switzerland, are playing a key role in promoting specific environment–trade initiatives, as well as Japan and Korea.
Developing countries like China, constituting a significant share of global trade, has also been stepping up efforts to make trade and value chains more sustainable for the environment. Just before the Kunming COP15 biodiversity convention in October 2021, China and the EU held their second High-Level Environment and Climate Dialogue. There, China agreed to bolster cooperation on: conservation and sustainable management of forests; supply chain sustainability; and combatting illegal logging and associated trading. This was the first time China’s top leadership had stressed the country’s support for the global effort to reduce deforestation. Likewise, at the UNFCCC COP26 in Glasgow, the USA and China issued a joint statement which recognised that ending illegal deforestation would contribute to the goals of the Paris Agreement; welcomed the Glasgow declaration on forests; and stated their plan to work together against illegal deforestation by enforcing their respective laws.
Similarly, China has been seeking to make its latest investments greener and in July 2021 the Ministry of Commerce and the Ministry of Ecology and Environment issued the ‘guide on green development in overseas investments’. It encourages businesses in China to integrate green development, and calls for them to stick to “green international rules” throughout overseas investment process. When host nations do not have applicable laws, or local environmental rules are too lax, Chinese enterprises are encouraged to apply standards provided by international organisations, multilateral institutions, or China’s own rules.
3. Several new environmental initiatives took shape at the WTO
In late 2020, during WTO’s Trade and Environment Week, multiple trade and environment related initiatives were announced. Now supported by a total of 81 countries, these initiatives evolved into three ministerial statements launched in December 2021. These initiatives include:
- Structured Discussions on Trade and Environment Sustainability (TESSD) supported by seventy-one members
- Informal Dialogue on Plastics Pollution and Environmentally Sustainable Plastics Trade (IDP) supported by sixty-seven members and
- Fossil Fuels Subsidies Reform discussions supported by forty-five members, respectively.
These three initiatives aim to put environmental sustainability issues on the WTO agenda, as challenges that need to be tackled by the global trade body. More than half of the co-sponsors across the three statements are from developing countries. Despite the postponement of the MC 12, it was encouraging to see members proactively launching the statements at a separate event.
Although the ministerial statements resulting from these initiatives contain no concrete or binding measures on members, it is the first time in the WTO’s 26-year history that there is a separate statement on environmental issues beyond fisheries subsidies reform. Therefore, it signals an important change in the direction the WTO is taking to bring trade policies better into alignment with global climate and sustainability goals.
4. Important trade-relevant pledges and targets introduced at biodiversity, food systems and climate events
While economic and trade fora saw an increasing acknowledgement and commitment towards environmental issues, a similar trend was observed in the key environmental fora. Trade-related targets featured in the climate and biodiversity discussions, and into their respective 2050 and 2030 targets.
In July 2021, the CBD Secretariat shared the first draft of the post-2020 Global Biodiversity Framework, which has 21 action-oriented targets for urgent action over the decade to 2030. Among these, Target 5 links directly to trade, i.e. to ensure that harvesting, trade and use of wild species is sustainable, legal, and safe for human health; Target 7, 13 and 14 have indirect linkages through reference to pollution, access and benefit sharing and aligning economic activities and financial flows with biodiversity values, and Target 18 addresses the reform or elimination of subsidies and incentives harmful to biodiversity, closely related to ongoing discussions at the WTO on fisheries subsidies and other environmentally harmful subsidies.
Later in October 2021, the Convention on Biological Diversity (CBD) Secretariat hosted, in a virtual format, the first part of COP15, which resulted in the Kunming declaration with 17 commitments to be turned into action points. The second part of COP15 will be a meeting in 2022 in Kunming, China, from 25 April-8 May 2022. Here, it is anticipated that the final decision on the post-2020 Global Biodiversity Framework will be taken, together with decisions on related topics including capacity building and resource mobilisation.
Food Systems Summit
During the UN General Assembly in 2021 in New York, the UN hosted its inaugural Food Systems Summit. Before the summit, some 93 countries submitted national pathways to reinvent their food systems, including countries like China, Brazil, and Indonesia. Five action areas to help inform the transitions needed to realize the vision of the 2030 Agenda have emerged from the Summit process. These include: (1) Nourish All People; (2) Boost Nature-based Solutions; (3) Advance Equitable Livelihoods, Decent Work and Empowered Communities; (4) Build Resilience to Vulnerabilities, Shocks and Stresses; and (5) Accelerating the Means of Implementation.
Soon after the Food systems summit, in October, the European Parliament adopted its Opinion report on the EU Farm to Fork Strategy, with a wide majority of 452 of the 699 Members of Parliament voting in favour of the report. Although the report does not have any legislative value, the vote is setting the future of the Farm to Fork Strategy and of the European food and farming system onto the course to be more fair, healthy and environmentally friendly. For this, the Parliament voted in favour of:
- Making binding the ambitious targets set by the Farm to Fork Strategy on the reduction of food waste and losses, of the use and risk of pesticides, fertilizers and antimicrobials, and on the uptake of organic agriculture, all of which are crucial to setting in motion the shift to agroecology.
- Incentivising and rewarding farmers whose farming practices protect and preserve biodiversity such as through agroecology.
- Taking a systematic and evidence-based approach to facilitate creating healthy, sustainable, and fair “food environments”, instead of relying on voluntary commitments and on individual consumer responsibility to change food systems.
- Changing EU’s current food production and consumption systems in order to prevent the spread of future zoonotic diseases, and in favour of the phase out of the use of cages in animal farming.
UNFCCC COP 26
The UNFCCC Climate Conference COP26 took place in Glasgow, United Kingdom, from the 31st of October to the 12th of November 2021, resulting in two major announcements on deforestation and relevant to trade.
The first, the Glasgow leaders’ declaration on forests and land use, was signed by more than 130 countries promising to “work collectively to halt and reverse forest loss and land degradation by 2030”. The signatory countries account for 90.94% of global forest cover. Among other things, the signatories committed to facilitate trade and development policies, internationally and domestically, that promote sustainable development, as well as sustainable commodity production and consumption that work to countries’ mutual benefit and do not drive deforestation and land degradation. The pledges include public and private funding for protecting and sustainably managing forests in regions such as the Congo Basin, support of indigenous people and local communities and their land rights, and commitments from financial institutions to divest from activities linked to commodity-driven deforestation.
The seconds the Forest, agriculture and commodity trade (FACT) statement, jointly led by the United Kingdom and Indonesia, which aims to support sustainable trade between commodity-producing and consuming countries. The FACT Dialogue process supporting the statement aims to agree on principles for collaborative action, a shared roadmap on sustainable land use and international trade, and to take action now to protect forests while promoting development and trade.
5. The roadmap for action in 2022 has several opportunities for enhancing action
Previously, there have been important environment-related commitments on deforestation like those made at COP26. For example, in 2014 the New York Declaration on Forests aimed to cut deforestation in half by 2020 and end it by 2030. However, a 2020 progress report showed the problem has only worsened since then – will the announcement made in Glasgow would be realised this time?
In 2020, the China Council on International Cooperation on Environment and Development (CCICED) published a report on greening China’s soft commodity value chain. With no Ministry responsible for overseeing this, the report suggests a high-level inter-ministerial mechanism to overcome limitations in powers or capabilities of any single ministry. This inter-ministerial mechanism could be an example for other countries to consider when seeking to contribute on using trade policy for environmental sustainability.
Despite the lack of complete success in achieving environmental goals in the past, in 2021 several pledges, commitments and declarations have laid the path for reinvigorating the efforts once again.
With the WTO’s 12th Ministerial Conference (MC12) to be rescheduled for 2022, expectations are high from negotiations relevant to environmental issues such as the reform of fisheries subsidies. This also brings an opportunity for the WTO members to live up to the ministerial statements on plastics, fossil fuel subsidy reforms, and climate change, and advance on sustainability commitments that demonstrate and deliver concrete action in 2022.
Likewise, high-level dialogues and meetings planned in 2022 such as the UN Environment Assembly 5.2 (UNEA), UN Biodiversity Conference COP15, and the 12th WTO Ministerial Conference, among others, provide a platform to support countries to discuss and take action that deliver a renewed multilateral trade agenda.
The content and the opinions expressed in this blog are the responsibility of the authors and researchers involved. This blog was written by Jayasurya Kalakkal.