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New Report Details WTO-Compatibility of Proposed U.S. Climate Change Legislation
Date: 12/5/2007
Written By: Eric Thomas or Jennifer Cummings, The Fratelli Group for NFTC, 202-822-9491

Washington, DC On the heels of vigorous Congressional debate on proposed climate change legislation, the National Foreign Trade Council (NFTC) today released a new analysis, titled "WTO-Compatibility of Four Categories of U.S. Climate Change Policy," which examines energy and climate related bills introduced in the 110th Congress from the perspective of their compliance with World Trade Organization (WTO) rules. The NFTC report also suggests that it is in the United States' best interest as a global leader to develop climate change policies that are consistent with our multilateral obligations.

"Every nation has a stake in the environment, and the United States has a unique opportunity to lead the global community in developing international climate change law and regulations. We should begin by ensuring that U.S. policies are in accord with the WTO rules we and our trading partners have adopted," said NFTC President Bill Reinsch. "As Congress debates climate change, it is important that policymakers understand that action will be most effective if it is multilateral and consistent with WTO rules."

The NFTC report examines seven leading bills pending in the Congress based on the policy tools they employ, including energy efficiency regulations and standards/government-administered eco-labeling, subsidies to encourage climate-friendly investments, public procurement of climate-friendly goods and services, and emissions trading.

"The NFTC does not advocate a particular policy on climate change, but we strongly recommend that any action be WTO-compliant, and we point out clearly that early movers have a significant opportunity to shape the development of international rules in this area," said Reinsch. "The United States must realize the importance of multilateralism and engagement with the rest of the world to develop climate change policy tools that can hold their own with respect to international law. It makes little sense to enact laws here that will only become the subject of WTO complaints by allied nations in the future."

According to the analysis, the emissions cap-and-trade system proposed in S. 2191 may in theory be one of the most WTO-compatible policy tools, as emissions permits are not currently considered a "good" or "service." The report cautions, however, that because such programs often involve government subsidies or require eco-labeling, their implementation may raise WTO concerns.

The detailed analysis also notes that the provisions for government procurement of climate-friendly goods included in H.R. 3221 do not appear to be in violation of the WTO Agreement on Government Procurement. However, subsidies for renewable energy included in the form of loan guarantees for renewable fuel facilities proposed in H.R. 6 are likely to violate the WTO Agreement on Subsidies and Countervailing Measures. Similarly, the report concludes that the government-administered eco-labeling also proposed in H.R. 6 may violate the WTO Agreement on Technical Barriers to Trade.

The report concludes, "In the end, passage of domestic legislation that is WTO-compliant will accelerate the meeting of U.S. national energy and climate change policy imperatives; will level uncertainties for U.S. enterprises, furthering their leadership in international commerce; and will give the United States a positive international reputation that could positively affect areas of diplomacy outside the sphere of climate change."

For a complete copy of the report, please click here.