1. The Role of Trade in Supporting International Efforts to Mitigate Climate Change WTO Public Forum 2007 Robert Teh WTO

2. Initial reactions More open trade and efforts to mitigate climate change can be mutually supportive Green policies at home are crucial WTO can contribute to mitigation through: Successful Doha round Liberalization of env. goods and services More agnostic about the need for changes in WTO rules There could be good arguments made for certain changes But demands that arise because of differing national climate change policies are unwise

3. Global Trade Growth, 1950-2005 Source: International Trade Statistics (ITS) 2006

4. Rising trade share in global output 5.5 10.3 17.6 19.4 0 5 10 15 20 25 1950197520002005 Year Share of GDP Sources: Maddison (2001) and ITS 2006.

5. Possible explanations Technological improvements Improvements in transport and logistics (e.g. containerization) Information technology revolution Trade and investment liberalization Unilateral liberalization Explosion of regional and bilateral trade agreements Multilateral negotiations Unbundling of production

6. Mechanisms by which trade can affect GHGs Scale effect Trade opening leads to increased output & hence more energy use (+) Composition effect Greater specialization towards products/services where country has comparative advantage (?) Technique effect Higher income leads to demand for better environment (-) Improvements in technique of production leading to less energy use (-)

7. Some implications Overall impact of trade on climate change depend on the strengths of these various effects Strengthening the technique effect is crucial Trade liberalization Increased income Specific focus: env. goods and services Green policies at home (e.g. appropriate price of carbon, R & D support) Substitution effects Investments in clean energy technologies

8. A simulation exercise Use a well-known global trade model (GTAP) to simulate 2 main scenarios: Trade liberalization only Trade liberalization with carbon tax Caveats: This is not an endorsement of the model Simulation results are used only for illustration Simulation assumes all countries adopt climate change mitigation measures

9. Simulation results Win-win