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COP27 AND THE 2022 EDITION OF THE WTO’S WORLD TRADE REPORT: HOW CAN THE NEW AGREEMENT AFFECT TRADE?

What is COP27? The 2022 United Nations Climate Change Conference or Conference of the Parties of the UNFCCC was presented by its hosts as “A defining moment in the fight against climate change”. The Climate Summit aimed to discuss and build a path for climate actions. The Conference was held from November 6th - 18th, in Sharm El Sheikh, in Egypt. Multiple climate change topics were addressed during over the two weeks, including clean technologies, innovation, energy transition, decarbonization efforts, just to name a few.

What was expected from the COP27? Simply put, the goal was to bring countries together creating a collaborative partnership between all nations involved. The main achievement was agreeing on a fund to help developing countries cope with issues related to climate change. This agreement was based on the long-term discussion that climate disasters are made worse by the pollution caused by wealthy countries, generating more risks to the vulnerable ones. Thus, this agreement could play an important role, giving poor countries a “compensation” for the cost of destructive climate effects.

For many decades developing countries have discussed the need for an agreement like this. However, concerns regarding the implementation of the fund and the participation of wealthy nations have already been raised. One of the concerns expressed during the negotiations was China. The Asian economy is considered a developing country and technically would qualify to use the fund, which is not realistic, considering many diplomatic opinions.

Now, could this new regulation bring changes to trade? To answer this question, we need to explore the 2022 edition of the WTO’s World Trade Report, which was presented on November 8th at the COP27. Titled as “Time to Act: Implementing Trade-Related Contributions to the Global Response to Climate Change”, the Report includes new analysis and recommendations on “how international trade and greater cooperation can amplify global efforts to address climate change and put the planet on a sustainable trajectory.”[1]  The Report can be summarized by these four key points:

  1. It addresses climate change as a major threat to future growth and prosperity. Why? Due to changes that will happen, inevitably, as a result of the current unsustainable practices. Such things are believed to result in productivity losses, damaged transport infrastructure and supply chain disruptions, etc.
  2. It interprets trade as a “force multiplier for a country's adaptation efforts in the case of climate disruptions, reducing costs of technologies and critical goods and services”. Here, adaptation and cooperation are addressed as aspects that will, perhaps, become necessary, especially for the most vulnerable economies. The idea is that open international markets would become a valuable key, by helping countries achieve necessary economic adjustments and resource reallocation.
  3. It explores the idea that trade can reduce the cost of mitigating climate change. One of the studies presented shows possible benefits in the event that we opt to eliminate tariffs and reduce non-tariff measures for certain goods.
  4. Lastly, it emphasizes the need for global cooperation.

The World Trade Report acknowledges the fact that trade alone is not responsible for generating emissions from production and transport, but trade and its policies can play a big role by accelerating technological innovations and adopting better practices.

In summary, the new agreement does not affect trade per say, but it creates room for change as it explores the relationship between trade and climate change.

If you have any questions about how trade might be affecting the environment, and if you are interested in knowing your logistics carbon footprint please click here.

Contributor: Matthew Dreckman


Resources

[1] WORLD TRADE ORGANIZATION, News and events.<https://www.wto.org/english/news_e/news22_e/publ_07nov22_e.htm>. Accessed on 11/13/2022.


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