1In September 2015, the UN General Assembly adopted the 2030 development agenda including a set of 17 highly ambitious sustainable development goals (SDGs) supported by 169 targets. The 17 goals are action oriented, global in nature and universally applicable to both developed and developing countries. They integrate economic, social and environmental aspects of sustainable development and recognise their interlinkages. Their achievement will be supported, in part, by the commitments made at the Third Financing for Development Conference (FfD), which took place in Addis Ababa in July 2015. Overall, the size and breadth of the agenda presents a sobering challenge for governments and other development actors. Some commentators have justifiably argued that by prioritising so many issues, the SDGs effectively do not prioritise anything and implementing them will be ‘unfeasibly expensive’ (The Economist, 2015). Furthermore, none of these targets and commitments are legally binding, leaving national governments to pursue some, or all goals, according to their own priorities.
2In spite of these shortcomings, the universal and multilaterally endorsed goals enshrined in the 2030 agenda set a high level of global ambition that will guide action by governments and, more broadly, the international community. As such, they represent a critical framework for policy orientation for the next 15 years.
3As governments move towards implementation, generating sufficient resources to reach these aspirational goals will clearly represent a major challenge. In the absence of any specific new financial commitment for implementation under the FfD outcome, international trade as a catalyst for growth and employment creation is likely to play a critical role in achieving the SDGs. Trade is not considered to be an end in itself under the SDG framework but rather a means of supporting implementation. While governments have already identified broad avenues through which trade policy could contribute to the 2030 Development Agenda, as we move to the implementation stage a more granular approach remains elusive. Acknowledging this reality, the FfD document calls on the World Trade Organisation (WTO) General Council ‘to consider how the WTO can contribute to sustainable development’.
4As an input to this debate, the present article reviews the various trade-related references in the 2030 Development Agenda in light of the latest evolutions in the global trade policy landscape. Based on recent literature, it then analyses the relationship between rapidly evolving trade policies implemented in major economies and the achievement of specific SDGs. In doing so, it adopts a pragmatic approach, acknowledging that—as does any negotiated outcome—the 2030 development agenda contains imperfections and ambiguities. Our purpose here is not to critique the details of the proposed SDGs, but rather to take the goals as given and explore possible avenues for harnessing the potential of trade policies to advance the goals’ objectives.
5To achieve this, Section 1 provides a short introduction to the development of the 2030 agenda and then gives a general overview of trade and trade policy references across the different goals and targets and in the FfD outcome document. Sections 2 to 4 focus more specifically on three areas or clusters of issues where trade’s contribution will be particularly critical—namely, food security (Goal 2), sustainable energy (Goals 7 and 12), and oceans (Goal 14). In each of these areas, the paper starts from what has been agreed during the UN process, analyses the role of both trade flows and trade policy instruments in achieving the agreed objectives, and finally assesses avenues for trade policy reform at different levels of trade governance (e.g. multilateral negotiations, plurilateral or regional agreements, or domestic reforms). Section 5 provides a conclusion.
- 1 The literature on the MDGs is extensive. For an additional critique of the MDGs, in particular the (...)
6The 2030 Agenda is partly a product of the experience of the international community with the eight Millennium Development Goals (MDGs), which have provided a set of common priorities for the global development community over the last 15 years. The MDGs focused on human development outcomes as measurements of development and progress (Norton et al., 2014). Their key strength, it has been argued, was their ability to prioritise a set of key challenges and their quantitativeness: they ‘express(ed) important social objectives in the form of concrete outcomes that (could) be measured’ (Fukuda-Parr et al., 2013, 5). However, the MDGs also attracted criticism, both of their design and their effectiveness, starting with the lack of integration of environmental considerations or the assumption that the goals were applicable only to developing countries.1
7To address these criticisms, the Rio+20 Conference on Sustainable Development in June 2012 (United Nations General Assembly, 2012), established a mandate for a new agenda that would ‘address and incorporate in a balanced way all the three dimensions of sustainable development and their interlinkages’ (para. 246) and that would be ‘universally applicable to all countries, while taking into account different national realities…’ (para. 247). The process of developing a single set of sustainable development goals to replace the MDGs was then formally launched in September 2013 (United Nations General Assembly, 2013). The approach of setting quantitative targets was implicitly retained, but the framework was to reflect the connections between issues in a way the MDGs did not. In contrast to the MDGs, which were essentially a condensed selection of some of the key commitments adopted by UN member states at the Millennium Summit in 2000 (Nayyar, 2012), the process for the development of the SDGs involved extensive consultation with the public and civil society around the world.2
8Within the negotiation process itself, fault lines emerged around many sensitive issues, including the relationship between the SDG framework and other UN processes, such as the as yet unfinished UNFCCC negotiations. For the same reason, targets related to trade in the SDGs conform very closely to existing multilateral language, in particular the mandates of the Doha Development Agenda (DDA) negotiations carried out within the framework of the World Trade Organisation (WTO).
9Defining the relationship between the means of implementation (MOI) set out as support for achieving the SDGs and the commitments made at the Third Financing for Development Conference in Addis Ababa in July 2015 (UN, 2015b), which covered many of the same issues, was equally challenging (ICTSD, 2015a). While the interlinkages between the two processes were clear, their scope was not identical, and developing countries in particular wanted to ensure that they achieved the best possible outcome between the MOI agreed within the SDGs and broader Post-2015 Agenda process and the support commitments made in the context of the FfD. The final draft of the 2030 Agenda (UN, 2015a, para. 62) draws the two together by identifying the FfD outcome as an ‘integral part’ of the Agenda. The achievement of the SDGs and targets will therefore be supported by both the MoI set out in the targets themselves and by the FfD commitments. Given that both the SDGs and the FfD outcome address trade and trade policy issues, the rest of this article considers the commitments made under both the SDGs and the FfD outcome.
10Finally, the indicators for measuring progress towards these targets are being developed by an Inter-Agency and Expert Group made up of UN agency statistical experts and government representatives and are expected to be adopted in early 2016. One of the lessons of the MDGs is that the choice of indicators for measurement can contribute to redefining the meaning of the target itself (see Fukuda-Parr et al., 2013). This makes the choice of indicators a political as well as a technical decision. With 169 targets and (presumably) at least as many indicators, it is also clear that governments will need to choose which goals or targets to focus on first.
- 3 This section draws on Tipping (2015) and Tipping and Wolfe (2015).
11The treatment of trade across the 2030 Agenda reflects the view that trade can, when well-regulated, contribute to growth and sustainable development. The SDGs therefore include several targets linked to a variety of trade-related policy reforms (‘trade-related targets’) as MOI. As drivers of sustainable economic growth, many of these targets could in fact contribute to the achievement of a variety of goals—in particular Goal 1, which focuses on ending poverty in all its forms. The FfD outcome reflects in turn many of the same multilateral trade policy targets, but updates them with references to recent WTO decisions, and—crucially—complements them with commitments around other important issues, including trade finance and regional trade agreements and integration. In light of the very slow progress of negotiations to amend multilateral trade rules, these more active areas of trade policy represent important opportunities for governments to use trade policy to advance their sustainable development objectives in the short term.
12Broadly, trade-related targets and commitments can be grouped as follows:
13Cross-cutting targets related to the multilateral trading system. These include references to doubling the exports of Least Developed Countries (LDCs), implementing duty-free quota-free (DFQF) market access for LDC exports, or implementing the new Agreement on Trade Facilitation, reached at the 2013 WTO Ministerial Conference in Bali.
14References to regional trade and regional integration. The FfD outcome emphasises the importance of regional integration for promoting inclusive economic growth, and commits countries to strengthening regional trade agreements. It notes, however, that the objective of encouraging investment should be balanced with the pursuit of other public policy objectives, and that both trade and investment agreements should include ‘appropriate safeguards’ so as not to overly constrain regulation.
15Targets aimed at removing certain trade distortions. These include goal-specific targets aimed at removing agricultural export subsidies and measures with equivalent effect, prohibiting certain kinds of fisheries subsidies that contribute to overcapacity and over-fishing, or rationalising inefficient fossil fuel subsidies that encourage wasteful consumption.
16Market access-related targets. References to market access include targets such as doubling the productivity and incomes of small-scale food producers, among others, by improving access to markets, and—more broadly—promoting the integration of developing countries into international value chains to support sustainable development.
17Technology diffusion targets. Several targets in the proposed framework—for example under Goal 6 on water and Goal 7 on sustainable energy—refer to the importance of access to, and cooperation in the field of technology in order to support sustainable development objectives.
18Trade-related assistance targets. These include goal-specific targets related to capacity-building and technical assistance, such as the need to increase support for Aid for Trade under goal 8 on sustainable economic growth and employment.
19Illegal extraction and trade in natural resources. Several SDGs include targets related to illegal extraction and trade in natural resources including protected species, whereas the FfD outcome calls for greater support for efforts that address illegal, unreported and unregulated (IUU) fishing, trafficking in hazardous waste and protected species, and illegal trade in minerals.
20Crucially, the financing outcome underlines that reaping the benefits of international trade and foreign investment requires not only appropriate trade policies but also a coherent framework of policies that create an enabling environment at the domestic level.
- 4 This is, however, far from the 1996 World Food Summit goal of reducing by half the number of under (...)
21According to the Food and Agriculture Organisation (FAO et al., 2015), about 795 million people still suffered from hunger in 2014. Since the early 1990s, however, the proportion of undernourished people as a share of the global population has decreased from 23.3 per cent to 12.9 per cent, virtually achieving the MDG goal of cutting, by half, the proportion of hungry people by 2015 (FAO et al., 2015). This corresponds to a decline of 216 million in the number of undernourished people in spite of a 1.9 billion increase in the world population over the same period.4 These successes are notably visible in large, populous countries such as China. In other parts of the world, including southern Asia and sub-Saharan Africa, however, progress has been slow, with undernourishment and other forms of malnutrition remaining at high levels overall (FAO et al., 2015).
22Building on this uneven progress, SDG Goal 2 calls for ending hunger and all forms of malnutrition by 2030, while doubling the agricultural productivity and income of small-scale food producers. It also underlines the need for sustainable and climate change-resilient food production systems that can resist extreme weather events such as droughts or floods. To achieve these goals, the text emphasises the need for policies that provide access to food for the poor but also to land, inputs, knowledge, financial services and market opportunities for value addition. Finally, it calls for investment in infrastructure, extension services, research and development, and measures to ensure the proper functioning of commodity markets and to limit extreme price volatility. As far as trade is concerned, the text contains a specific reference to the need to correct and prevent trade restrictions and distortions in world agricultural markets, through—among other measures—the elimination of export subsidies.
23In the last 15 years, global agricultural trade flows, excluding intra-EU trade, have grown almost threefold to reach USD 1 trillion (Laborde, 2014) with developing countries’ markets representing a significant part of agricultural trade and an overwhelming share of its growth. This trend is likely to continue in the coming decades as income and urban population continue to grow, often accompanied by changes in diet. The largest demand will come from Asia, which is expected to exhibit a trade deficit for all commodities—except rice, vegetable oils and fish—in 2023, but the rapidly growing population in Africa will also result in increasing food imports (OECD and FAO, 2013). These trends clearly point to the essential role that trade will continue to play in achieving world food security. Yet, while imports will spread over a large number of countries, the OECD-FAO Agricultural Outlook 2015‒2024 predicts that exports of agricultural commodities will become more concentrated among fewer countries. This increased reliance on relatively few countries to supply global markets for some key commodities will result in higher market risks, including those associated with the adoption of disruptive trade measures.
24Historically, markets have been characterised by abundant supplies exerting downward pressure on food prices and ultimately farm incomes. As a response, policymakers, particularly in OECD countries, had recourse to various forms of support such as income and price support, and other forms of subsidies, often combined with prohibitive tariff barriers on sensitive commodities. While these measures achieved their stated objectives at the domestic level, they induced surpluses that had to be disposed of in international markets, often with the help of export subsidies whose effect contributed to further lowering world prices and providing disincentives to invest in agriculture in developing countries, ultimately affecting the livelihoods of small farmers and food security (Schmidhuber and Meyer, 2014). Over the last eight years, however, several agricultural commodities have experienced significant price spikes, reflecting weather-related production shortfalls in major producer regions, against a backdrop of high energy prices, increased use of crops for the production of biofuels, and low rates of productivity growth in many regions of the world. The magnitude and frequency of these spikes hit low-income, food-deficit countries particularly hard exerting significant effects on levels of undernourishment and affecting trust in international markets as a source of affordable food.
25The SDG and FfD outcome documents highlight the need to remove trade distortions, starting with export subsidies, as a way of enhancing global food security. In the EU, export subsidies amounted to more than 10 billion euros a year in the early 1990s. Today, however, the use of this instrument has practically disappeared, even though almost USD 500 million of export subsidies were still in place in 2011–12, mainly in the EU, Canada and Switzerland (Diaz-Bonilla and Harris, 2014). This decline is largely the result of past cuts in EU price support and the decoupling of direct payments combined with recent high prices on the world market. However, the EU has not formally dismantled its export subsidy instruments, maintaining the possibility of using them in the future even though they are no longer active.
- 5 According to Martin and Anderson (2011), in the 2006‒8 surge, insulating policies affecting the ma (...)
26While export subsidy-related distortions have shrunk, export restrictions have become more prevalent. During the 2006‒8 and 2010‒11 crises, they significantly contributed to exacerbating the negative effects of price spikes on food security by reducing the ability of poor consumers to access adequate food at affordable prices.5 In the medium term, these restrictions have also undermined confidence in international markets as a trustworthy source of food, and lowered the propensity to invest in agriculture in exporting countries. In spite of these significant negative spillovers, agricultural export restrictions are largely ‘under-regulated’ in the WTO and remain a politically highly sensitive issue (Anania, 2014).
27Beyond export subsidies and restrictions, domestic support remains a major source of trade distortions, undermining investment and ultimately food security prospects in poorer countries. Figure 1 provides an overview of the evolution of domestic support in the EU, the US, China, and India. In the EU, successive reforms starting in the early 1990s progressively removed price support for decoupled direct payments, allowing the EU to place the largest part of its domestic support in the WTO green box (i.e. non- or minimally trade distorting payments). The latest Common Agricultural Policy (CAP) moves further towards this notion of ‘public money for public goods’ by introducing additional environmental requirements as a condition for receiving support. Trade-distorting payments—that is to say, payments linked to the level of production—on the other hand, are confined to sectors with certain difficulties. In spite of these restrictions, there appears to be greater flexibility for countries to use such instruments compared to under the previous CAP. As a result, trade-distorting aids have started to grow again, from a projected EUR 2.7 billion in 2014 to a projected EUR 4.8 billion in 2015, an increase of nearly 75 per cent.6
Figure 1 Domestic support in the US, the EU, China, and India as a value of total production.
Source: Author’s elaboration on WTO notification.
28In the US, agricultural spending is focused on domestic food aid through the Supplementary Nutrition Assistance Programme (SNAP), also known as food stamps—a relatively uncontroversial programme from a trade distortion perspective. A new farm bill, however, eliminated direct payments to farmers—considered as green box under WTO rules—as they became difficult to justify in a relatively high price environment, replacing them with new subsidised insurance schemes protecting farmers from yield and price variation risks. These instruments will likely isolate US producers further from poor local harvests or falls in world prices, inducing potentially significant trade distortions. For cotton alone, Lau et al. (2015) estimate that US subsidies could depress world prices by 6 to 11 per cent, affecting cotton producers in other parts of the world, notably in West Africa. More broadly speaking, the significant budget outlays resulting from early estimates of possible future price scenarios have raised doubts about the US’s ability to accept future commitments under a possible multilateral reform as currently envisaged under the Doha Round (Glauber and Westhoff, 2015).
29Large emerging countries have also considerably increased their support for agriculture in an attempt to incentivise domestic supply or support small farmers’ incomes. This trend partly reflects the concern that they cannot solely rely on global markets to feed their populations, but also the need to support the livelihoods of sizeable rural populations.
30China’s fast-growing farm support schemes appear to be designed to rectify problems arising from historical underinvestment in the agricultural sector and to reduce the large, growing disparities between rural and urban incomes. Today, China provides subsidised inputs (diesel, fertilisers, pesticides, farm machinery or improved crop varieties), and has introduced a policy for purchasing grains at a minimum price for rice and wheat in major crop producing areas (Ni, 2013). China also introduced a cotton price policy involving a minimum guaranteed price, backed by the government’s intention to purchase cotton when the price falls below it. As a result, by the end of 2012/13, China held roughly 60 per cent of global cotton stocks, a policy that initially contributed to increasing world prices and is now raising some fears that future releases of these stocks could depress world cotton prices (ICTSD, 2013). Finally, China provides some support in the form of decoupled support payments based on historical production levels. Yet the precise arrangements for providing this type of support vary across provinces, and the actual degree of decoupling appears to vary, prompting some experts to argue that such payments cannot be considered as non- (or minimally) trade distorting.
31India’s agricultural domestic support has grown dramatically in recent years in an effort to support small farmers while ensuring cheap food for poor consumers. To achieve this, India puts a particular emphasis on input subsidies for fertilisers, irrigation, electricity and seeds. Food purchases of rice, wheat and cotton at administered prices by the government are also important in the country’s overall policy framework, with a growing risk of such policies breaching ceilings of trade-distorting support allowed under WTO rules. Beyond the potential distorting effect of these policies, purchases made to support the minimum price have often resulted in actual stocks far in excess of the norms established by the government, despite the country releasing 42 million tonnes of wheat on the world market between 2012 and 2014 (Hoda and Gulati, 2013).
32 WTO negotiations aimed at opening up markets and reducing trade-distorting agricultural subsidies have languished for nearly fifteen years with no prospect of a solution in the short term. At the heart of the matter is disagreement among large industrialised countries and emerging economies over their respective levels of concessions. In the absence of progress on the multilateral front, regional trade agreements (RTAs) have proliferated. While sensitive products are often excluded from RTAs, Bureau and Jean (2013) estimate that on average RTAs increase agricultural and food exports from signatory to signatory by between 32 per cent and 48 per cent when fully phased in. Ongoing negotiations, notably related to so-called mega-regional trade agreements, are likely to result in markets becoming more open. However, these agreements essentially focus on reducing tariff and non-tariff barriers and have generally failed to address agricultural subsidies. Advancing the SDG targets of reducing trade-distorting support will therefore have to happen at the multilateral level. A first step to re-engaging in the negotiations might consist of eliminating export subsidies and disciplining measures that have an equivalent effect, such as export credits. The cost of locking in this policy commitment would be minimal as these measures have almost disappeared in practice. Another low-hanging fruit might consist of limiting export restrictions by ensuring that such measures do not affect the purchase of food for humanitarian purposes by specialised agencies in times of food crises. This idea was originally floated at a G20 meeting in 2011 but never got translated into a binding WTO commitment. As with export subsidies, the cost of implementing this idea would be minimal, but implementation would help build trust and facilitate further engagement towards the negotiation of more ambitious disciplines. The political impulse could come from the next WTO Ministerial Conference, in December 2015, or in the context of the G20, and could be followed later on by efforts to progressively reduce other forms of trade-distorting support over a certain transition period.
33The changing climate is arguably one of the most significant challenges facing humankind and energy generation is at the centre of the problem. According to the Intergovernmental Panel on Climate Change (IPCC), more than half of the increase in global temperatures observed in the second half of the twentieth century is extremely likely a result of anthropogenic factors, including the generation of atmospheric greenhouse gas (GHG) emissions (IPCC, 2013). A significant proportion of these emissions come from the energy sector (IPCC, 2011). Implemented properly, renewable energy may, in addition to helping to mitigate climate change, ‘contribute to social and economic development, energy access, a secure energy supply, and reducing negative impacts on the environment and health’ (IPCC, 2011, 7).
34Targets and objectives related to tackling climate change and supporting sustainable energy production appear in several places throughout the SDGs and the FfD outcomes. Addressing climate change is a stand-alone goal in the SDG framework, supported by several targets including improving resilience to the impacts of climate change and integrating measures for tackling it into national policy plans. Target 12.c under Goal 12 on sustainable production and consumption and paragraph 31 of the FfD outcome both refer, in identical terms, to reforming subsidies on fossil fuels. Goal 7 on access to sustainable energy includes supporting targets on access to modern energy services and increasing the use of renewable energy.
35The most directly trade-relevant of the various targets are those within Goal 7 that refer to access to renewable energy technology. Target 7.a calls for enhanced ‘international cooperation to facilitate access to clean energy research and technology, including renewable energy, energy efficiency and advanced and cleaner fossil-fuel technology, and promot[ing] investment in energy infrastructure and clean energy technology’. In the FfD outcome (paragraph 49) UN member states make a similar commitment to cooperating to ‘facilitate access to clean energy research and technology, expand infrastructure and upgrade technology for supplying modern and sustainable energy services to all developing countries, in particular least developed countries and small island developing States’.
36The global renewable energy market has grown rapidly over the last few years and in 2013 renewable electricity generation accounted for almost 22 per cent of global power generation (OECD/IEA, 2014a). Although the cost of several renewable energy (RE) technologies, particularly solar photovoltaic systems, has fallen significantly and is expected to continue to fall, the competitiveness of renewable energy with fossil fuel-based energy varies considerably between countries, and stable policy frameworks may still be needed to support the scaling up of RE production (OECD/IEA, 2014a). Trade is an important feature of the market for renewable energy-related goods. According to the OECD (2015), both trade and investment have played important roles in the growth of the wind energy sector and—in particular—the solar energy sector, because manufacturers of solar panels increasingly rely on imported inputs, such as solar PV cells and modules and solar inverters.
37Measuring trade in sustainable energy goods is not straightforward, particularly because many goods that are used to generate renewable energy are only one small part of a large tariff code, and many are also dual-use (Jha, 2009). Exports of single-use renewable energy technology amounted to USD 64.7 billion in 2007, of which purely intra-EU trade made up around USD 21.6 billion, around USD 18 billion coming from developing counties, in particular from China (Jha, 2009).
38This trade has been driven both by cost factors and policy. The period 2004‒2011 saw rapid growth in exports of solar PV parts and systems from developing countries, particularly China, to developed countries, driven by the low costs of manufacturing in developing countries, but also by incentives for renewable energy generation provided by developed countries’ governments (UNEP, 2014). Although the market for renewable energy technology was driven for many years by demand in developed countries, South–South trade in renewable energy technology among Asian countries has intensified in recent years (UNEP, 2014). The centre of gravity of the global solar PV market, in particular appears to be shifting: from 2011 to 2012, new installations of solar photovoltaic generation capacity in developing countries grew by 60 per cent, while they fell by nearly 25 per cent in Europe (UNEP, 2014). Interestingly, this diversification of production is somewhat reflected in recent trade remedy investigations: China imposed anti-dumping and countervailing duties on South Korean exports of polysilicon (an input into solar power generation equipment) in 2013, and in the same year India was investigating imports of solar modules from Malaysia and Chinese Taipei (Kasteng, 2014).
39Given the importance of managing the transition towards low-GHG energy generation, and the apparent diversification in the patterns of global trade in RE technology, having global trade systems that facilitate the scaling up of production of renewable energy technologies will be an important part of ensuring that their cost continues to fall and that they can be made accessible throughout economies.
40Many governments have used trade-related policy tools, such as tariffs, local content requirements, and subsidies, to incentivise the transition to renewable energy generation and to help their industries to capture and retain part of the fast-expanding market for renewable energy goods and services. The use of some of these policies causes tensions, not only between domestic policy objectives but also potentially with trading partners.
41Tariffs on goods associated with renewable energy production protect domestic suppliers, but may also increase such goods’ price on the domestic market, and may therefore reduce their accessibility to other domestic users, including participants in the value chain who may rely on imports of intermediate goods for further production. Modelling by the World Bank has indicated that reducing both tariff and non-tariff barriers to trade in four key clean energy technologies (clean coal, efficient lighting, solar, and wind power) in a group of developing countries with high greenhouse gas emission profiles could help to increase the diffusion of those goods (World Bank, 2008). Further findings (Jha, 2013) also suggest that removing trade distortions in the renewable energy sector could help to increase clean energy deployment, but underline that the benefits of removing these barriers is likely to vary between sectors and between countries. The political tensions associated with liberalisation (between the protection of domestic producers and improving access for other consumers) mean that governments approach negotiations on liberalising tariffs with a varying range of interests. Reducing trade barriers to access to renewable energy technologies is also only part of the solution. Ensuring that technology diffuses both between and throughout economies requires an enabling policy environment that addresses other barriers to energy access, including the difficulty of financing along the supply chain, particularly in poorer areas (Nampoothiri and Manoharan, 2013).
- 7 In addition to the Canada–FIT dispute, for example, the United States has challenged India’s use o (...)
42Among the various trade-related policy tools used to foster the growth of renewable energy industries, local content requirements (LCR) rank among the foremost. At least 21 countries, including emerging economies and 16 OECD members, have planned or implemented local content requirements associated with solar or wind energy projects (OECD, 2015). LCRs essentially create demand for locally produced renewable energy-related goods, and therefore favour local RE producers over producers in other countries, seeming very likely to be inconsistent with WTO rules. Their use in large RE markets including Canada, the US, China, and India, has led to a spate of WTO disputes.7 Questions have also been raised about their effectiveness, as very few governments appear to have put in place the kinds of supporting policies that would make LCRs more likely to support domestic innovation capacity (Kuntze and Moerenhout, 2013).
43Besides LCRs, another significant policy intervention in the renewable energy market is subsidization. Germany, the US, Italy, Spain, and China together accounted for nearly 70 per cent of the USD 121 billion in global subsidies provided to renewable energy in 2013 (OECD/IEA, 2014b). The same report projects that, under one scenario, subsidies to solar photovoltaic and offshore wind generation are likely to continue until these become competitive with other power sources. This suggests that subsidies are likely to remain a feature of the renewable energy generation industry for some time. Subsidies to specific industries can also, however, generate distortions in global trade. There is ongoing debate about whether—and if so, how much—space should be created for subsidies in WTO rules. These include subsidies to renewable energy, which might also generate environmental benefits (see, for example, Wu, 2015).
- 8 WTO (2013a; 2013b) of 6 May.
44The WTO’s Appellate Body recently considered the issues of LCRs and subsidies to renewable energy generation in the dispute Canada—Certain Measures Affecting the Renewable Energy Generation Sector/Canada—Measures Relating to the Feed-In Tariff Program or Canada—Renewable Energy (DS 412/426). The combined appeal was brought by the EU and Japan against Canada in the light of the Province of Ontario’s decision to require, as part of a feed-in tariff programme, renewable energy to be produced using a certain level of domestically produced generation equipment in order to benefit from guaranteed prices under the programme. In this dispute, the WTO’s Appellate Body (AB) ultimately confirmed the panel’s finding that the policy’s local content requirement was inconsistent with Canada’s national obligations under the WTO’s agreement on Trade-Related Investment Measures and the General Agreement on Tariffs and Trade, 1994. With respect to the subsidy claims, the AB also—controversially—suggested that whether a financial contribution provided by the government to wind and solar power generators resulted in a benefit to the recipient firms (one of the elements of a subsidy under WTO rules) should be measured in the context of a separate market for renewable energy, with its own cost structure, and that the fact that this market had in practice been created by government regulation did not necessarily mean that a subsidy had been provided.8 This approach to the ‘benefit’ test, several scholars have argued, essentially puts particular types of clean energy subsidisation beyond the scope of the WTO rules (see, for example, Rubini (2015)).
- 9 See WTO (2012) circulated on 20 September, WTO (2014b) AB report of 7 July (and corrigendum), and (...)
45Governments have also used trade remedy measures to attempt to redress other governments’ subsidies and protect and promote their industries’ space in the RE market. Between 2009 and late 2013, trade remedy investigations (regarding either countervailing duties designed to remedy the subsidisation of exports, or anti-dumping duties designed to remedy unfairly priced imports) were begun with respect to 15 components of renewable energy generation equipment, seven of which resulted in duties being applied. These investigations targeted glass fibre and wind towers (used in wind power generation) and solar modules and panels (used in solar power generation) and involved the large players in each industry; the US, the EU, China, and India (Kasteng: 2014). The surge of trade remedies has also led to WTO disputes. In the context of broad disputes around trade remedy methodologies, for example, China has challenged US countervailing and anti-dumping duties applied to Chinese exports of photovoltaic cells and wind towers.9 These ad hoc responses to alleged unfair behaviour create uncertainty for businesses and investors in the sector. As Horlick (2013) points out, even the expected imminent initiation of anti-dumping and countervailing duty investigations can have a chilling effect on trade in renewable energy technologies. An international cooperative solution that clarified the rules related to government intervention in the RE market might be a useful alternative to ad hoc responses. Such a solution could involve amending the WTO rules so that the application of trade remedies requires strong evidence of anti-competitive behaviour, or limiting the application of remedies by level, duration, or scope (see Kasteng (2014)).
46The 2030 Agenda and the outcome of the UNFCCC Conference of the Parties in December 2015 are not likely to have a direct impact on trade policy around renewable energy. The contribution of trade policy to efforts to increase access to renewable energy—the focus of several of the 2030 Agenda energy targets—will thus need to be identified and advanced by the trade policy community. The 2030 Agenda’s focus on access suggests that governments should be aiming to ensure a supply of renewable energy technology that businesses and consumers can buy at the lowest price possible. Governments are also likely, however, to continue to balance pursuit of this objective with other priorities, like building domestic employment: approaches that, as explained above, have led to tensions with trading partners. An internationally coordinated approach that clarified rules related to the use of policies for supporting the production of renewable energy equipment could help to reduce uncertainty and set a level playing field for a competitive global renewable energy sector.
47Finally, subsidies provided to fossil fuel generation and use are among the most important of all government interventions in the global energy market. These subsidies totalled USD 550 billion in 2013, at least four times the level of support provided to renewables, and according to the IEA are hobbling investment in renewables (OECD/IEA, 2014c). Their reform could also have direct environmental benefits: a recent review of projections suggests that eliminating just consumption subsidies for fossil fuels could reduce GHG emissions by between 6 and 13 per cent by 2050 (Merrill et al., 2015). Reforming fossil fuel subsidies, it has been argued, would not only reduce incentives to use fossil fuels and encourage investment in low-carbon technologies, but also provide governments with a source of funds to devote to sustainable development priorities (Merrill, 2014).
48The opportunities for international cooperation in the trade sphere to support the scaling-up of the production of renewable energy goods, services and technology include ongoing efforts to reduce tariff barriers to trade in environmental goods, and efforts to address international policy tensions by clarifying rules around what constitutes fair support for the renewable energy industry.
49There are already several cooperative trade policy processes underway that could contribute to improving access to environmental goods, including renewable energy technology. Negotiations around the liberalisation of environmental goods in the WTO’s DDA are designed to reduce tariff and non-tariff barriers and thus improve the accessibility of these goods. In the absence of progress in these negotiations, a group of 17 developed and developing WTO Members (including the 28 EU member states) is currently negotiating a plurilateral agreement to reduce barriers to trade in environmental goods, including some renewable energy technologies. (ICTSD, 2015b) Governments involved in regional trade agreements could, similarly, target liberalisation not only of goods containing renewable energy technology but also associated services, which can account for a substantial proportion of the jobs generated along renewable energy value chains (OECD, 2015).
50In addition to removing trade barriers to access to renewable and energy efficient technology, governments could work with the private sector to develop partnerships to improve access to financial tools that could support the diffusion of renewable energy-related goods throughout their economies. A further collaborative option, for the medium to longer term, would involve the negotiation of a Sustainable Energy Trade Agreement (SETA), which could include provisions clarifying rules around what constitutes fair support for renewable energy technology and, conversely, when that support should be subject to trade remedy rules (on the SETA idea generally, see—for example—Kennedy (2012)).
51Oceans, seas and inland bodies of water are a crucial part of the earth’s ecosystem, and play an extremely important role in sustainable development. According to the FAO (2014), in 2010 fisheries, both marine and inland, and aquaculture provided nearly 3 billion people with about 20 per cent of their animal protein consumption. However, wild fisheries’ ability to continue to meet the needs of a growing global population may be limited. Most fisheries for which the FAO collects data are already fully exploited; around 29 per cent are overfished and only around 10 per cent may be able to produce larger harvests (FAO, 2014). In the absence of growth in wild capture fishing, aquaculture production has filled much of the gap between demand and supply left by capture fishing, and is likely to continue to do so (World Bank–FAO, 2013). Together, capture fisheries and aquaculture support the livelihoods of between 10 and 12 per cent of the world’s population, from harvesting through to post-harvest activities related to access to markets, including processing and distribution (FAO, 2014).
- 10 The most commonly cited definition of IUU fishing is that established in the FAO’s International P (...)
52The SDGs and FfD outcomes contain several references to oceans, and particularly fisheries issues. Several targets relate to improving the productivity of fisheries, particularly in the context of food security. Target 2.3 under Goal 2 on ending hunger, for example, refers to doubling the productivity and incomes of small-scale food producers, including fishers, by improving access to productive resources, markets, opportunities for value-addition and support such as financial services. Target 14.b under Goal 14 on oceans refers specifically to improving small-scale fishers’ access to marine resources and markets. Target 14.4 focuses more generally on the effective management of fisheries, in particular on ending overfishing and IUU fishing, in order to return fish stocks to a condition where they can produce maximum sustainable yield (MSY).10 IUU fishing is also referred to in paragraph 92 of the FfD outcome, in which UN member states recognise that illegal extraction of and trade in various natural resources undermine revenue streams and governance efforts, and commit to enhancing the monitoring, control and surveillance of fishing vessels so as to reduce IUU fishing.
- 11 See WTO (2001; 2005,Annex D, para. 9).
53One of the most explicitly trade-related targets in the SDGs, target 14.6, refers to the prohibition of certain forms of fisheries subsidies that contribute to overcapacity and overfishing, language that reflects the Hong Kong mandate of the WTO negotiations on fisheries subsidies.11 Target 14.6 also refers, more specifically, to eliminating subsidies that contribute to IUU fishing, and bringing the issuance of new such subsidies to a ‘standstill’, reflecting language agreed in paragraph 173 of the Rio+20 conference outcome. The FfD draft (paragraph 83) reflects the first part of the target, calling on WTO members to strengthen disciplines on fisheries subsidies, including (but perhaps not necessarily only) through the relevant WTO negotiations.
54The FAO’s 2014 State of World Fisheries and Aquaculture provides an overview of trade in fishery products, which is amongst the most intense of all food commodities. In 2012, global trade in fish products was worth nearly USD 130 billion, 54 per cent of which accrued to developing countries. Fisheries generate more revenue for developing countries than many other agricultural commodities, including coffee, natural rubber, cocoa, and bananas. While developing countries with particular strengths in processing fish products, like China and Thailand, are among the world’s largest exporters of fish, important regional trade in fish products, particularly in Africa, Asia and Central America, is often under-reported in official statistics.
55Projections by the FAO and World Bank (2013) suggest that fish production and trade is likely to expand in the years up to 2030, driven in large part by aquaculture, centred in Asia, which by then will likely provide over 60 per cent of all fish for human consumption (in 2006, it provided around 42 per cent). Trade in fish products is likely to grow by around 40 per cent in volume terms in the years up to 2030, with some regions (e.g. South Asia, particularly India) becoming increasingly important exporters while other regions (in particular Africa) become more dependent on imports of fish products.
56The impact of trade in fishery products on different aspects of sustainable development is a contentious issue, in part because the sector’s very heterogeneous nature means the specific impact of policies varies widely. While it is clear that at a global level fisheries play a crucial role in global nutrition, the impact of international trade on the distribution of gains from specific domestic fisheries and on food security in different circumstances is complex. As Bjorndal et al. (2014) explain, while revenue from the export of wild fish may make an economy better off overall, it may also mean certain types of fish are less available, and more expensive, on local markets, reducing access for part of the population. The revenues from fishery exports may not necessarily be well distributed within a population. In some cases, countries both export high-value fish and import cheaper kinds of fish, which may not be as nutritious as those exported. Some studies have also found that trade resulted in greater pressure on fish resources, underlining the importance of good fisheries management (Bjorndal et al., 2014).
57The gradual reduction of tariffs on fisheries products that has taken place through regional trade agreements in recent years has led to several policy tensions (Sumaila et al., 2014). While higher tariffs, in some markets, on processed fish products (tariff escalation) has raised concerns regarding its impact on developing country post-harvest processing, the gradual overall reduction of tariffs that has occurred in the last two decades has also eroded the margins of preferences enjoyed by many developing countries (see also Campling (2015)).
58Sustainable trade in fisheries products is hampered by illegal and unreported fishing, the global losses from which have been estimated to be between USD 10 billion and USD 23.5 billion per year (Agnew et al., 2009). The same study establishes a significant correlation between the incidence of IUU fishing and weak governance, which underscores the importance of references to support for monitoring, control and surveillance highlighted in the FfD text. In the absence of a binding multilateral agreement regarding trade in catch from IUU fishing, some large markets like the US and the EU are moving ahead with unilateral trade measures that, in the case of the EU, include the requirement that fish imported into the EU carry a catch certificate (NOAA, 2015; European Commission, 2008). Dissatisfaction with the governance of fisheries has also prompted growth in private sustainability labels for both caught and aquaculture-produced fish (Washington and Ababouch, 2011). Early evidence of the impacts of fish eco-labelling schemes, the stringency and costs of which vary widely, suggests that in some cases the schemes have reduced the effects of fishing on marine ecosystems, and that meeting eco-labelling standards can improve the security of demand for producers (Washington and Ababouch, 2011).
- 12 Leaked texts of the draft TPP environment chapter were published on the Wikileaks website (www.wik (...)
59Sustainable fisheries production can also be undermined by the provision of subsidies that contribute to overcapacity in fishing fleets and overfishing of fish stocks. One of the most comprehensive recent estimates (Sumaila et al., 2013) suggests that—at a global level—fisheries subsidies are worth around USD 35 billion per year, of which around USD 20 billion are capacity-enhancing—that is to say, subsidies that tend to encourage the exploitation of fisheries resources beyond sustainable limits. The WTO negotiations highlighted in SDG target 14.6 and the FfD draft provide a mandate for a multilateral and legally binding outcome, but have yet to reach a conclusion. Potentially significant plurilateral disciplines on fisheries subsidies are under negotiation in the Trans-Pacific Partnership (TPP) Agreement, and it is possible that these will be completed before a WTO agreement is reached. It appears that TPP negotiators have been considering prohibiting subsidies to vessels found to have engaged in IUU fishing and subsidies to fishing that targets over-fished stocks, as well as additional transparency obligations regarding fisheries subsidies.12
- 13 See: WTO (2015a) submitted by Barbados on behalf of the ACP Group of States; WTO (2015b) submitte (...)
- 14 See WTO (2007).
60Subsidy reform, at multilateral, regional, and domestic levels, remains a priority for the international community. The 2030 Agenda’s specific commitment to prohibit subsidies that contribute to overcapacity and overfishing and eliminate subsidies contributing to IUU fishing by 2020 could provide further political momentum in this area. In the WTO, three new submissions on fisheries subsidies were tabled in the first half of 2015, and included proposals for a stand-still on current subsidy levels, and prohibitions on subsidies related to over-fished stocks, vessels or operators engaged in IUU fishing, and vessels engaged in destructive fishing practices.13 While the scope of the prohibitions put forward in each of these proposals is substantially less ambitious than the list of subsidies proposed for prohibition in the 2007 text prepared by the Chair of the fisheries subsidies negotiations,14 the proposals arguably reflect a renewed interest among a wide range of WTO members in having disciplines established at a multilateral level, perhaps as a first step towards further disciplines. However, the absence of progress in other parts of the DDA has raised doubts about the WTO’s ability to move decisively on this front in the absence of progress in other areas of the negotiations.
61In the short term, regional negotiations might offer a more promising, albeit less comprehensive, avenue to pursue. If the parties to TPP succeed in establishing a first set of subsidy disciplines as currently envisaged, countries participating in other regional trade agreements—particularly those that involve countries that fish shared regional stocks—could consider using the agreements as platforms for cooperation to reform any capacity-enhancing subsidies they provide. Importantly, the 2030 Agenda’s inclusion of fisheries subsidies reform as a sustainable development priority could contribute to countries including unilateral subsidy reform in their development plans, as is currently envisaged in countries such as Indonesia, and act as a hook for development assistance to support reform efforts.
- 15 On cooperative approaches to addressing IUU fish trade, see Young (2015).
62Beyond subsidies, trade measures can contribute to the elimination of IUU fishing by preventing fish products from IUU fishing from entering major markets. The European Union’s IUU fishing regulation, particularly its escalating warning system backed by possible trade bans, is already having an impact. The EU’s import policy is—of course—limited to one (albeit very large) market; but the US is developing its own scheme. For such measures to be really effective, all large importing countries would have to coordinate their efforts to close international trade in IUU fish catch, while ensuring close consultation with and support to exporting parties in their fight against IUU fishing. A first step in this direction could start with close coordination between the EU, the US, and Japan as the largest markets in the design of unilateral trade measures, moving gradually towards plurilateral and ultimately multilateral trade disciplines (e.g. a WTO code of conduct on illegal fish trade) once a critical mass of countries is reached.15 In a similar vein, RTAs could be used to incentivise the ratification of the FAO Port State Measures Agreement (PSMA), which targets the landing of illegal fish products. Pursuant to the commitments made in the Financing for Development outcome, governments could also include support for improving the monitoring, control and surveillance of fishing vessels (addressing some of the governance challenges faced by fish exporting countries) as part of their efforts to reduce IUU fishing. This would in turn contribute to improving the sustainable management of fisheries and ensuring that the production of fish, both for trade and for domestic consumption, is legal and sustainable.
63The trade-related targets included in the 2030 Development Agenda are not fundamentally new and many, particularly those in the SDGs, tend to repeat earlier commitments included in WTO negotiations. As governments start implementing the 2030 Development Agenda, the relevance of these targets must be assessed in light of recent changes in trade policies being applied in several large economies. These policy changes have revealed critical loopholes in international economic governance frameworks or at least areas where existing rules would require further elaboration and updating. The 2006‒2011 food crisis exposed the weaknesses of existing WTO disciplines in protecting poor consumers against unilateral export restrictions imposed by third countries exacerbating price spikes. Substantial increases in trade-distorting support provided by large emerging economies and the resurgence of such instruments in the EU and the US have highlighted the need to update agriculture subsidy rules. The spate of trade remedy disputes around renewable energies such as wind and solar has prompted environmentalists to question the adequacy of existing rules on subsidies and anti-dumping measures. In a similar vein, the magnitude of resource-depleting subsidies for fisheries and fossil fuels has exposed the limits of current international subsidy disciplines.
64Over the last 15 years, global responses to these challenges have largely remained elusive, not least because of persistent disagreements among industrialised countries and emerging economies. As governments struggle to define new terms of engagement in a multipolar world, reaching a WTO agreement on these issues, for example, only seems possible at the cost of significantly reducing the level of ambition originally envisaged—a situation that contrasts starkly with the ambitious aspirations of the 2030 Development Agenda. The extent to which the political commitments enshrined in the SDGs will contribute to reviving the WTO talks remains unclear, but ultimately several, if not all, of the issues described here—including agricultural subsidies, for example—will require multilateral solutions.
65In the meantime, advancing the 2030 Development Agenda might require looking at alternative approaches such as regional or plurilateral solutions. Frustrated by the current deadlock in the WTO, some countries have already moved towards plurilateral agreements as illustrated by the Trade in Services Agreement (TISA), which involves 50 countries and covers about 70 per cent of the global trade in services. At the same time, regional trade agreements have proliferated with several large-scale negotiations currently underway such as the Trans-Pacific Partnership (TPP), the Trans-Atlantic Trade and Investment Partnership (TTIP) between the EU and the US, or the Regional Comprehensive Economic Partnership (RCEP) in Asia. These mega-regionals consist in deep integration partnerships involving countries that account for a major share of world trade and occupy central positions in international production networks.
66While some fear that such agreements might further fragment the international trade system and discriminate against non-parties, such alternative approaches offer opportunities to address some of the challenges described here. The plurilateral Environmental Goods Agreement (EGA), while currently limited in scope, could pave the way for future cooperative arrangements in the area of clean energy. The TPP negotiations provide a promising avenue for crafting specific disciplines on a subset of fisheries subsidies, which could later on be adopted by a wider set of countries. Other RTAs contain innovative approaches to illegal trade, local content requirement provisions, or export restrictions. The G20 can offer a forum for commitments to reducing fossil fuel subsidies among large economies, leading the way for others to follow. If these initiatives are designed in an inclusive manner, they could form the basis for future cooperation by a larger number of countries. The multilateral system could ultimately provide a forum to multilateralise these innovations once a critical mass of countries has subscribed to them. In the absence of progress on the multilateral front, taking advantage of these different avenues while opening new ones could already contribute significantly to achieving the ambitious goals and targets envisaged under the 2030 Agenda.
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