Trade and climate change

by Feb 14, 2012Magazine

There’s an unacknowledged elephant in the climate change debate: trade agreements. These agreements are major unrecognised obstacles to what would otherwise be urgent, rational and fair mitigation or adaptation measures to climate change.
A conflict is certain between the objectives of the One Million Climate Jobs Campaign and the myriad of multilateral, regional and bi-lateral trade agreements involving South Africa. Despite this certainty, specific predictions cannot be made in the absence of concrete climate change policies by the South African government. This is because of the technical complexity of the trade nexus and the ambiguity of many of the provisions of the various agreements.
It is these various factors that make trade law such a lucrative profession.
Nevertheless, the Campaign’s focus on local production to both create jobs and reduce greenhouse gas emissions allows conjectures on the form of the looming conflicts:
In the first place, local production of renewable energy (RE) sources will require initial protection, in the form of import tariffs and subsidies to local producers in order to make foreign products expensive and therefore uncompetitive. Protection measures would also have to be used to ensure that locally available minerals used in RE are not exported but instead kept in the country and transformed into finished products. Both the subsidies and the tariffs could be non-compliant with a host of trade agreements because of discrimination against foreign companies and investments. Non-discrimination is a cardinal principle of neoliberal trade law (even though not consistently or equally applied).

However, even certain non-discriminatory measures would fall foul of some trade agreements. One example is preference to the public sector, a Campaign objective, which would be challengeable even though it affects local and foreign-owned businesses equally –  since trade agreements would allow the foreign-owned companies, and not local ones, to take legal action.

Similarly, preference given to small-scale agriculture in the form of non–price competitive supply contracts – an essential support to promote labour-intensive farming methods as well as to reduce the distance food travels from farm to consumer and, hence, the amount of CO2 emitted – would, besides arguably being an unlawful subsidy, discriminate against the dominant supermarkets, regardless of whether they are supposedly South African or foreign. Again, it would be foreign investors who would be able to take legal action.

Moreover, the General Agreement on Trade in Services (GATS), which is notable among trade agreements for the extent to which it explicitly serves the interests of transnational corporations and for ‘locking in’ agreements against changing circumstances, increases the risk of legal action being taken in the above example, as Walmart has already indicated. In the above case, everything except the actual growing of the food is considered a service. A concession made under GATS is designed to be permanent, with little if any regard to whatever changes in national interest, the view of an electorate or, indeed, what climate change may necessitate.

As no more than an example of the threat GATS poses to national sovereignty, South Africa’s recent decision to impose a moratorium on natural gas drilling in the environmentally sensitive Karoo region could be challenged under proposed additional GATS restrictions. Perhaps even more chilling in terms of the extent to which trade rules supersede both national sovereignty and national social policy are the two most recent actual decisions by the World Trade Organisation (WTO) which found violations in US measures to reduce teenage smoking and dolphin-safe voluntary labels!

Transforming transport to prioritise rail and public road transport and to create a large number of Climate Jobs via the local manufacture of trains, coaches and buses – which are all major Campaign demands – is, besides the WTO’s general provisions, also likely to fall foul of GATS (since transport is a service under GATS).

Our government’s rationale for most of its trade agreements is that they provide agreed rules – with anarchy being the alternative. By far the most succinct of the counters to this claim was provided in 2005 by Trevor Manuel, the then Finance Minister: ‘The problem is not that international trade is inherently opposed to the needs and interests of the poor but that the rules that govern it are rigged in favour of the rich.’

Rules rigged in favour of the rich crowd out such quaint notions as justice and reason, even in the face of a threat to our continued existence on earth.

The struggle for sustainable climate safety is thus at once a struggle against the trade rules ‘rigged in favour of the rich’.

The good news is that we have reason to believe that at least some in our government understand the need to join us in this struggle against the ‘rigged’ trade rules. This is because, as early as 2004, the government recognised the need to reform the WTO, with its ‘many imbalances prejudicial to the … interests of developing countries’.
As recently as last year, the Government elaborated its critique in even more forthright terms: 
As an economy with high unemployment and an abundance of unskilled workers, mainstream trade theory would suggest that South Africa would have a comparative advantage in unskilled-labour-intensive goods.
South Africa’s experience has not conformed to the assumptions of mainstream trade theory … an open trade regime has not addressed high unemployment and inequality. … What is clear is that the South African experience of liberalization, since the mid 1990s has had adverse impacts on the poor.
Rules are important. But current rules are imbalanced and prejudicial. However, as imbalances in the global economy are perpetuated by inequities in the systemic ‘rules of the game’, existing multilateral governance structures should be reformed to ensure equity.
When addressing the issue of Developmental Trade Policies, the Government’s ‘New Growth Path’ policy document of November 2010 calls for the ‘protection of policy space for development strategies’.
The strategies of the One Million Climate Jobs Campaign are at once development strategies. Moreover, we don’t shy away from the huge problem caused by the already huge loss of ‘policy space’. If the above pronouncements are not mere rhetoric, then the Campaign has good reason to expect government readiness to resist claims that its climate change policies and practices conflict with trade agreements.

This is a shortened version of a research paper for the One Million Climate Jobs Campaign. The full text, with footnotes and references, will shortly be published on the Campaign’s website. www.climatejobs.org.za

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