Trade and Environment: Hii at the Panel on Climate Change, China and the WTO

Join the Community Conversation! What is the role of trade and trade regulations in promoting environmental sustainability?

On March 30th 2011, the Human Impacts Institute (Hii) attended a Columbia University-hosted panel discussion addressing a recent landmark case at theWorld Trade Organization (WTO) in which the United States challenged China’s subsidies of domestic renewable energy manufacturing. The panel, which featuredNew York University Professor Robert Howse, Former Counsel at the Office of the United States Trade Representative and Partner at Sidley Austin LLP Andrew Shoyer, and Nobel Laureate and Columbia University Professor Joseph Stiglitz, was asked to explore the motivation behind this action as well as the implications that it would have on the global economy as the world attempts to deal with increasing carbon emissions.

The main impetus of this dispute, which was originally brought forth by the United Steelworkers of America Union, was that China was awarding subsidies for wind power which were contingent on the parts being manufactured in China. As such subsidies are said to be trade distorting, this is a violation of WTO rules and is considered to be giving unfair advantage to Chinese manufacturers. This dispute is currently only in the consultation phase, but is being looked on with great interest as it could have implications for similar programs in other countries.

The discussion prompted much debate between the panelists, specifically on the natures of WTO rules and energy subsidies themselves. On the former, Professors Howse and Stiglitz both criticized the rules of the WTO as not being economically sound and for setting up unnecessary impediments to the dissemination of clean energy, especially in poorer countries which are largely not responsible for climate change and which need to grow their economies. Andrew Shoyer, on the other hand, defended the rules, stating that they did not in fact impede China or any other country from pursuing clean energy, just from pursuing them in ways that negatively affected other nations. He went on to further argue that there were in fact many other options available to such countries which were not in violation of WTO rules. On the topic of subsidies, the panelists retained their positions, with Shoyer in support and Professors Howse and Stiglitz voicing criticisms. Specifically, the professors argued that the competition between the fossil fuel and alternative energy sectors was already unlevel due to the huge amount of subsidies currently being given to support the former. Professor Stiglitz elaborated on this stating that, in fact, there were even more subsidies of fossil fuels then often realized, as many are hidden, for example, in our tax structure. He also pointed out that even without taking subsidies into account, the market for fossil fuels is already hugely distorted in its favor. The reason for this is that the detrimental environmental impacts of fossil fuels are not internalized into the cost of carbon, and thus the cost of carbon based fuels remains artificially inexpensive, being that it does not pay for the damages it causes.

Thus, while the discussion revealed that China has most likely breached WTO rules in its subsidies, the evening left attendees questioning both the environmental and economic rigor of such regulations. It also left many pondering the question of fairness in alternative energy manufacturing and in demanding that we maintain a playing field between countries and sectors which already is, to a large extent, unlevel.

By Arianne Donar, 2011 Human Impacts Institute Environmental Education Intern

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