Trade and climate: How the EU can protect the Paris Agreement

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In its “CETA action plan”, presented in October, France committed to including, in all future trade agreements, “compliance with the Paris Agreement among the essential element clauses" for cooperation. [Storm Crypt / Flickr]

It is possible to effectively integrate the Paris Agreement into new trade deals, including CETA and the upcoming JEFTA with Japan. But it requires a bit more creativity than the recent political declarations, write Mathilde Dupré and Samuel Leré.

Mathilde Dupré is trade policy officer at the Institut Veblen for economic reform, a think tank based in Paris. Samuel Leré is environnement and globalisation officer at Fondation pour la Nature et l’Homme, a French NGO created by Nicolas Hulot.

The climate is the greatest missing part from the investment and trade deal between the EU and Canada. Such was the conclusion from the official expert report that the French authorities commissioned to evaluate the health and environmental impacts of the Canada-EU free trade agreement, known as CETA, which came into force five months ago.

Since then, French and EU policy makers have made quite a few announcements. The latest came two weeks ago, when the Trade Commissioner Cecilia Malmström claimed on twitter that “Paris deal reference is needed in all EU trade agreement today”.

This is a step ahead for the Commission, but it is also a very light and symbolic gesture as nothing concrete would happen if a country doesn’t comply with its climate commitments. In the meantime, the EU mandate to negotiate the Transatlantic Trade and Investment Partnership (TTIP) with the US remains valid and discussions might resume at any time.

The French government has shown willingness to go a step further. “No Paris Agreement, no trade agreement. The US knows what to expect” recently said Jean-Baptiste Lemoyne, the Foreign affairs Secretary of State in front of the parliament. For its part, Nicolas Hulot, Minister for the Ecological and Inclusive Transition, declared again on the 14th of February that in the current context “CETA is not compatible with the fight against climate change”.

In its “CETA action plan”, presented in October, France already committed to including, in all future trade agreements, “compliance with the Paris Agreement among the essential element clauses of the political dialogue and cooperation agreements that are decided along with trade agreements – these trade agreements may be revoked or suspended in the case of confirmed violations of essential elements clauses, consistent with customary international law.”

Unfortunately, studies reveal that these clauses, already used to promote and monitor the respect of human rights, are far from being adequate and sufficient to make a real difference. Furthermore, the compliance criteria remains unclear and might only mean “having ratified” the Paris Agreement, regardless of the compliance with national pledges. In that case, such a provision would only allow to target countries such as Russia – even the US would appear as “compliant”, however paradoxical it would be.

In reality, it is possible to effectively integrate the Paris Agreement into new trade deals, including CETA and the upcoming JEFTA with Japan. But it requires a bit more creativity than the recent political declarations. A two-stage process would make it possible :

  • First, new provisions could be inserted in trade deals in order to allow for the agreement (or at least parts of its clauses) to be suspended if a Party fails to meet its GHG emissions and climate finance commitment or to regularly upgrade them. This provision would be the first very concrete step towards subjecting trade law to environmental law.
  • Secondly, to make this provision operational and binding, trade agreements could plan for the creation of an ad-hoc committee formed by scientists and NGO representatives in order to assess the extent to which countries have met their commitments (based on the information provided by those countries to the UNFCCC) and propose the appropriate trade sanctions if needed.

This provision alone will obviously not be sufficient to make trade deals fully compatible with the Paris agreement. It will be crucial that countries take further action by removing from bilateral trade agreements all the provisions that have the potential to harm the climate.

The contentious “investor state dispute settlement mechanism”, which allows companies to sue governments that try to protect the climate, should for instance be dropped. And the objectives of the regulatory cooperation process which aims to promote a convergence of standards should prioritize environmental protection over trade and investment promotion and ensure the full respect of the precautionary principle.

Such a reform would offer a concrete response to the White House’s position on climate change and the Paris Agreement. More than 2 years after COP21, it would also strengthen the implementation of the climate deal and prevent any rollback of national climate commitments. Its implementation should of course not give any country a new excuse not to increase, as planned, its national climate contribution, especially in 2018 in the context of the Talanoa Dialogue.

Finally, it would incentivise private actors to operate and invest in states where the energy transition and the climate remain a top priority.

The French President made a speech at the Bonn Climate Conference (COP23) as well as the 2018 WEF suggesting that trade and globalisation should be made compatible with the protection of the Commons. If Emmanuel Macron wants to walk the talk on climate, he should now use his political clout to convince other Heads of State and Government. The run-up to the June G7 summit in Quebec, Canada  will provide him with a great opportunity to tackle this.

Calls grow for ‘green clause’ in EU trade deals

There is widespread consensus on the need to level the playing field for European companies confronted with environmental and social dumping from foreign competitors. Just how hard the EU should hit on wrongdoers remains a major sticking point, however.

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