State of trade with Pascal Lamy: T4SD Forum 2019 keynote

State of trade with Pascal Lamy: T4SD Forum 2019 keynote


Ladies and gentlemen I’m going to introduce you to someone who needs no introduction. The former director general of the WTO as we all know former EU Trade Commissioner. Perhaps you’re not quite so aware of everything that Pascal Lamy has been doing since President of the Paris Peace Forum. President emeritus of the Jacques Delors Institute on policy and so many boards of directors that he sits in that I will not tell you everything. But it’s in the app. Pascal thank you very much. I hope that you’ve well digested lunch and do come and take a working lunch ladies and gentlemen. So I’m going to ask Pascal a few questions and then we get to go to the floor. You’re very informed. I’m sure you’ve got some great questions for Pascal. And I think most probably I will start with that old chestnut of Is trade good or bad for the environment. In a few words. Well that’s the question. We have three cities a good old Paris Berlin and Brussels put to a crowd. Of a hundred and twenty young students which we gathered in Hungary on purpose to talk about vibrant European integration this summer. So the question was exactly that one is it was not how we trade. It was not trade good. The answer was E trade but for the environment. So the answer was 40 percent yes. 37 percent no. And the rest don’t know. Sounds like Brexit. Very close. Loss. Sounds like a reasonably good sort of future in your what people have in mind. It being understood that the sample was young people sort of below 2025. And that would be my answer because that’s what they believe in. That’s what matters. Not my answer with their answer. So do you think that we’ve got to better integrate the environment into trade so that we have open trade that works for the people in the planet. Well I think the answer is definitely yes. Not that this connection was not there. It’s been there for a long time. The WTO. Constitution clearly puts trade opening at the service and advancement to stability. We’ve had a trade and environment committee in the WTO for a long time. There are a number of specific trade provisions in many month multilateral environmental agreements. Even the jurisprudence although I know diplomats don’t like this word. But it’s it’s clear way to do it. Even the jurisprudence of the appellate body if you compare it to the sort of fell steps in the 90s mid 90s and now is very different. So the connection was there has been there. But it’s true that is now entering it. It was more a sort of connection for lawyers connection for institutions interested people. It wasn’t a real connection with politics. And the real connection with politics is now. In a majority a negative negative one. That’s reality. Lots of people in this planet and notably in the younger generation perceive trade as bad for their money. Why would you transport but. You know if you can eat oppose on why do pains come from Japan and then a bit of that is on here. I mean you know that. So this is a political reality which we now have to cope with. We can argue and it needs to be very seriously argued in economics in technical terms. In measuring carbon footprint. And there’s this notion for instance that producing locally and consuming local is the right answer. What about the product is absurd. There are many areas where importing a lower carbon footprint makes a lot of sense. So it’s very complex but I think the reality is that. Whereas the sort of intellectual connections where there the political connections remain to be done which is why we’ve we’ve been working a lot and we just discussed this. Paper which the institute I good at Paris and Brussels produced and Berlin produced in July. We’ve been discussing it during work which is why we now have to. Walk the talk and that paper I have it in front of me so we’re doing a bit of publicity here. Time to green EU trade policy. TIME Why now. Some people would say that it should have been done before the Intergovernmental Panel on Climate Change has been reporting since 1988. So it seems that it should have been done before. Would you agree that to do that at an EU level. It was somehow done before. If you look at how green all trade produces on this planet. And there are many. Countries who have a trade policy. I mean the EU is probably the greenest one which doesn’t say it’s OK but say. It it started now. Why now. For a simple very simple reason which I really express very bluntly because I don’t have to report to anybody on what I say at least on this sort of topic. Because European election. Have changed the European political landscape. Up there in the European Parliament and that there is no way any further EU trade agreement will go through the European Parliament without seriously greening the EU trade policy. It’s as simple as that. I’m not saying I like it or dislike it. I’m just saying this is a political reality. And if. One start from the premise that given that world growth is projected to go round three point five percent on average for the next 20 years and that the EU growth for same average same 20 years is one point five. This growth difference between what you generate and what the world generates tells the EU. You have to keep opening trade. So this is a strategic necessity not least for social reasons. Because as you know the European social model is rather costly and it doesn’t work with the 1 percent growth. So there is a strategic necessity for the EU to keep opening trade. And then there is a political necessity to do what is necessary to convince a majority of European parliamentarians with a rather strong green group. Now that opening trade does not work against the environment. Are you moving the 40. 37 majority I mentioned among the young people squeezed quisling in Hungary to the other way round. Which is why we need a majority in the parliament. So the question of course is but how and in this paper you say multilateral trade environmental trade agreements. Forget it. I mean is that because we’re in a world where multilateralism is under pressure or is there another reason why you’re saying. Forget that as a path to pursue. All right. We’re not exactly saying forget that but we’re saying what we’re saying is that you cannot rely on the multilateral rules based trading system to address this question seriously for the years to come not least not least because we have a major player in the WTO which is the US who doesn’t want to play that game. So that’s assuming assuming the US would. Remain where they were. During the Obama administration on the environment. Which was a clear difference. Even then it would probably be very difficult because of the capacity of trade diplomats and I hope that not too many in this room who will feel bruised but they have a formidable capacity to pull castigate. So. These needs we cannot rely on that now four hundred three that you’ve got to got we we have we have as a silver bullet which is not the multilateral trading system which is carbon pricing. The simple reason is that in a global market capitalistic on economy view whether we like it or not is another issue. If you properly price carbon, then capitalism, production systems, relative prices will adjust to a new shape of trade flows that fit with a change in the relative prices and with a carbon price that’s, let’s say, a hundred euros per ton, then the world economy will move green. That is absolutely convincing. And I think it’s absolutely right except that it’s not now. We were just discussing doing on time the proportion of today’s. Emissions. Which are under a existing or projected carbon pricing scheme. You’ve got twenty nine European trading systems emission trading systems all on this planet and you’ve got 28 countries that have a that’s a proper carbon pricing tax. This is 57 countries and these covers 20 percent of greenhouse gas emission not just CO2 by the way but greenhouse gases 20 percent. Let’s assume with a big effort we will move to 40 percent five years from now. When do we get two hundred percent. So I mean if we only rely on this the planet will be dead before we have a proper global carbon pricing system. So we need a second best solution. Not that this one should not be sort of a first row but we need other tourism. And there is a whole tool box which in this paper we rapidly review and which then we will detail in order to help the European Commission and European solution to fill the big gap. Which we now have between green proclamations following the elections. Maybe she’s found that the so-called Green Deal and this notion that oh we need a border cut an adjustment in the EU. What do you think of that. Because that is something that has been proclaimed by the underlying commission loosely. Now I mean is it. It’s clearly been proclaimed. The question is whether the gap between Proclamation and what they have ready in in the door was for legislation through the country then the Parliament is not there. No border cabinet adjustments. All systems are rich. And I remember that because I worked on that when I was EU trade commissioner. And that was centuries ago. Now we worked on that. At the time. The U.S. Congress worked on that many countries worked on that. It’s a fantastic idea. Except that nobody has ever practiced it. So if fantastic idea during 20 years that has no. Incarnation I must have a problem. No of course they’re all serious problem in the technicalities of that. And the easy ways out. If we look at the market idea as one. A few sectoral examples notably in the EU because as you may know in the European Union the emission trading scheme is not that strong. It’s focused on a few realize including energy production. So this is an area where the notion that because of carbon leakage because of competitiveness a common border adjustment makes sense. So it’s either sectoral. Steve. Cement aluminium. Or or. It’s the sort of what specialty is called not how solution. Which is. Don’t go the whole way of enormous problem. What’s the metric of a carbon foot plane. What if the carbon footprint of what you import is lower than your domestic production. Better now than on our solution is have a club of countries that put a tariff across the board upon exports coming from countries that do not belong to the club. So but that’s an example of a plenty of program Asia and plenty of papers on the literature on both the companies offering these enormous. What about expanding the. The Club for the Trading Standards and shipping for example we had somebody from mask on the panel this morning and they made some announcements about net zero emissions but of course they’re one of the biggest emitters. Do you think that they should be covered by this. Trading. Sure. Yeah. I mean I think they have to be covered. They have to wait or not pay the price for the carbon they emit. Same for the aviation sector. The problem of course is as we know again this is a very simple concept. Getting the politics to do that and I think and I carefully listen to what Representative America said this morning. The guy is way ahead of the average position of the shipping industry on this planet. Way ahead that would be the challenge to get the alignment behind it. All right. The UK decided which is back after work 2025. They would not certify any non carbon neutral new chip. No. Is a good thing except that. This is about new ships. You have to understand. And I was a Navy officer in a very long time ago that the average age of a ship today is probably 35 years. So if things have a very long life. So these these things need to go in this direction. It’s inevitably piecemeal. So it’s a bit of carbon pricing. It’s a bit of regulation and probably a big bit of regulation. And by the way we should where the EU has a major leverage because of the size of its internal market and the fact that if EU. Produces a solid regulation on whatever production imports especially this will contaminate a large part of the rest of the world like we did it. In other words we’re like we did it for chemicals with water transfer. So what I was just going to say I was wanting to give some time to the audience just moving onto the WTO because there’s been an Environmental Goods Agreement which I think wants to incentivize um with lower tariffs uh. Green goods and higher tariffs for non sustainable goods. I’m putting it in my language so I’m sure it’s much more technical than that. But it’s been stalled this agreement. So what do we do. About that at the at the WTO level. Now. You have to knock the heads of trade negotiators. I was a trade negotiator. I know full well. How to never end a trade negotiation. I mean it was the reason why these e.g. a thing. Now if the issue is. Your washing machine is brown and mine is green. So mine deserves a tariff reduction and yours deserves a tariff increase. Mind you the notion of what is green and what is a brown washing machine among trade negotiators not among experts of washing machines among trade negotiators can also centuries like the sex of vengeance. So you need a very big political determination as some say you need somebody that would say OK this is for washing machines. This is for bicycle. This is full toothbrush and stop meddling the thing. And so far this has not happened. What about agricultural subsidies. There’s this whole system of classifying them on whether they distort trade or not. And there’s a suggestion in your in your paper that there might be an environmental and agricultural production of value put into that. I mean is that something that’s feasible. Are we going to be able to knock the heads of the trade negotiators together on that one. Nobody in our paper we say we could. We could invent something which is similar to the umber blue green box which which exist in agriculture by the way not that the system has been very inefficient. But it’s been efficient enough for the US to stop negotiating the Doha round. So there must be something to that. So it’s it’s just an analogy. And by the way in the areas of subsidies. There is something much more urgent to be done. Even then very sort of inventive idea like this one which is fossil fuels or fisheries subsidies. These are areas where the capacity of the beat you to invent to to put together and run a system of discipline should be there. I mean enforcing subsidy rule is the number one issue we have to confront. The problem is that there is zero mandate in the WTO about that. This morning we were having a discussion on the EU Mercosur agreement and I listened to an interview that you did with French radio and I think you said this was back in July before it had all of the problems in ratification in Austria and the issues with France and Ireland that you thought that this agreement because it ties both scenario into the Paris climate change agreement would stop deforestation in the Amazon. We have a cattle rancher who may or may not be in the field in the room but he certainly hello John who certainly knows what’s happening in the Amazon. And I think he disagreed. I won’t actually use the word that he said but he disagreed. Let’s see whether we agree or disagree. What I said at the time was that the Paris Agreement was a way to bring both snow and budget into the Paris tent. And to enforce. The is running the AMA’s own in a way compatible with the Paris Agreement which is and I believe this is the case now. Of course the other side of the coin is that if they don’t comply. The Mercosur agreement will not. Work. So there is a higher conditionality than in other trade agreements. In the meantime we’ve seen the consequences of the fact that apparently and I’m not an expert of that. Brazil is not. Implementing its Paris agreement if not obligations at least notification. Which is why in these conditions I continue. No way. The European Parliament will in the next month or Euro ratify a Mercosur agreement that does not take the deforestation problem seriously. Just before I go to the audience. I have to ask you a Brexit question because no discussion these days ever have to have a. Something which is not on Brexit but it’s something that I think a worrying environmental NGO is in the UK that if the UK does leave and it starts to rush for trade agreements then environmental standards might not be included in those trade agreements. Is that a concern that you share. No. Because I don’t think such agreement will pass muster in the House of Commons. If there is still a House of Commons which so far what I really hope parliamentarians see the right thing. I mean the British government as far as I know as far as I know and you never know because they might have changed in the last 50 minutes but so far like other sort of reasonably modern democracies trade agreements with the UK must go through the UK Parliament and I don’t think a minute because because Great Britain is part of the European civilisation. I don’t think one minute that such an agreement would go through the House of Commons so that they can threaten it. I mean there is an understand fear and by the way one of the proposal we’ve done in this dry paper was precisely to invent an EU post by UK. If and when it happened. That would be the best available benchmark on a environment truly compatible trade agreement. We have an occasion to do that between the EU and UK. Well I’m glad you’ve been doing it because I haven’t seen much sign of progress in the UK but let’s hope they’ll read your paper. I’d like to now go to the audience and please you can either use the app or you can just raise your hand say who you are and what your question is to Pascal. As you can see he can answer anything. Please the. Hi. I’m sorry. My name is Meryl’s. I work at ITC and I have a question with regards to an agreement on my mental goods. And we have seen the negotiations vent for a few years E.J.. And then we have a mandate in the Trade and Environment Committee since 1996 but never nothing has. There has not been a single agreement in that committee since then. And on the other hand we saw an agreement in the Paris agreement where there is an agreement to an end but not to the means to the end. In debt and on the other hand we see the developments in the market there in the last two years. The production of renewable energy is more cost effective than the fossil fuel subsidies. Looking at this don’t you think that the organizations for instance WTO and ITC they must be promoting the use and showing the countries the means of how it is economically feasible or better for them that they would shift their concern their direction towards renewable energy rather than making them to put a carbon price or emission trading kind of system that we had in European Union. Well first I think you need all of this. So you need to use the whole tool box. We can have a very interesting academic or policy discussion. The reality is that the problem is becoming so big so urgent that we have to address it with many many of these instruments. Second you’re probably right that there is a need a. For a forum for a table for a place where you connect the various dots and the various bits and pieces of this for reasons which I would not command. The WTO has been reasonably shy to move in this direction. In the name that it does not have a clear mandate from its members. And there are reasons why. If you put this on the table of the WTO. And if you ask for a mandate to start a forum a negotiation and a discussion on this sort of thing this will inevitably immediately be politicized. Many developing countries would suspect that this is a backdoor to agreeing protectionism. The US will believe that it’s one more reason to finger point them for the moment and so on. So. That’s something which nevertheless should be considered. I mean we should in my view we should have a sort of WTO unit sort of hub. That’s where countries in this planet do come with proposal. Discussions on some sort of. Global not not only WTO trade and environment committee something that allows them a discussion and allows people notably in developing countries. Who fear that once more this will work against them. We had the prime minister by vetoes this morning. She is not very confident that this discussion is going to turn on the right side for her country. And she may be right. And there will be costly transitions. So I think we need something of this kind. Thank you. Another question Yes please sir. Thank you Pascal for your presentation was so good to hear you. Um the regular e-mail from Margaret Cunneen Brazil. And there is a lot of talking about carbon and carbon and measuring carbon there is a lot of methodologies and ways to do that. And. I really feel threatened by the the idea of targeting a product that is sustainable because it has low carbon content or low carbon emissions. How do you see sustainability in a broader picture. Considering agricultural products we’re gonna have the CBD Convention on Biological Diversity meeting in China next year trying to agree new targets for biodiversity conservation and agriculture relates totally with biodiversity also. So how do how do you see this picture of agricultural sustainable trade considering different indicators beyond carbon carbon needs. One of them. Thank you. No I totally agree that the agriculture it was a carbon is one and only one of the issues. You have a big problem with your diversity. I have a big problem with soil degeneration and regeneration which is a major which is a major topic. So. I’m. Fine with that. It remained that. Climate it is carbon emissions greenhouse emissions for India is still a big issue including for. Cane growing or be growing or cattle growing. We’ve heard that this morning. And when you look at where they’re all carbon pricing systems the. Agriculture is not there in any place. Because farmers is usually a political leverage that has allowed them to escape any sort of serious CO2 due to price. You’ve seen what happened in Europe. You’ve seen what happened in Australia for instance. So this is a problem. But I totally agree with you that it’s not the only problem. And I think that if if we go the way of BPA. If we go the way of traceability and that’s probably the way we will have to go in many of these areas then the biodiversity back all the social impact of agricultural practices will have will have to come in. But if if the notion is that sustainability is a is a wider issue than just carbon emissions. I totally agree with that. And if you look at what’s happening in the oceans for instance we know full well that the oceans are a big carbon sink but that they are also one of the victims of the system. Thank you very much. I’m very aware of the time and that we do have another panel of its due to begin but I would like to take one question and let me take it from the lady in front. Thank you very much. Thank you Pascal. You’ve always been a big promoter of the environmental agenda in the WTO. Let me introduce myself. My name is Anna from Majorca. I work for Europe so I very much like the idea that you just put forward on a you know WTO hub which is obviously not easy. And we’ve we’ve hosted joint high level conferences with the WTO. But in order to really push the envelope you have to bring the whole membership on board. So my question to you is if you were still leading the WTO what would you do right now and how would you bring the membership on board on the most pressing environmental issues and on an institutional collaboration. Thank you. Well you know I never answer the sort of question I never answer the central question. I’ve been for many years in my life in politics and I’ve learned very. Early on. That you always succeed. Incompetent people and will always replaced by ungrateful people. So I know that. Which is why I never saw this sort of question. But but I think there is a need there is a need for a wider discussion. I that the last question we had from Brazil is a very good example. If you only focus on climate change then people would say no. The French have nuclear energy so they have a clean nose and look at the rest. So this is something which I think re matters. Sustainability is a very white issue. It has a huge impact on the way we produce and we consume. So I would. For instance I would try. And have a good G 20 discussion about this. Not a G7 discussion. This is too easy. Or even a G8 although it probably would be a bit more difficult. But a G 20 discussion G 20 is not the government of this planet. But it’s a place where you can introduce topics of this kind. And that I think would make a lot of sense. And if. The WTO DG the obesity section the U.N. Is then the World Bank president and the IMF if they the five of them agree that they should something like this should happen at the G 20. Good work. Thank you very much Pa. for that positivity at the end of the conversation with myself and everybody in the audience. A round of applause I think is due. Applause.

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