Pledges under WTO rules

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Date produced: 05/11/2013

Can you identify other international legal regimes – outside the UNFCCC – where countries have come up with their own pledges/targets towards a global goal, and the extent to which they been successful in terms of achieving that global goal?

Summary:

Voluntary pledges and targets are key parts of international trade law, particularly the General Agreement on Trade in Services (GATS). Used in this context, they are intended to guarantee what might be regarded as ‘equity’ by allowing countries to inscribe commitments in line with their own national interests and circumstances.

The success (or otherwise) of this legal instrument is difficult to assess, because it relies on assumptions about the type of agreement that might be reached in the absence of voluntary pledges and targets. However, after 12 years’ of negotiations, the Doha Development Round of the World Trade Organization (WTO) still has not achieved any framework agreement between the Parties, let alone final national schedules. More generally, OECD studies indicate global trade liberalisation commitments have not increased for some time. This suggests legal instruments such as national schedules, while offering flexibility for Parties and allowing incorporation of diverse interests, cannot substitute the political will necessary for agreements to occur.

Use of voluntary pledges and targets might indeed provide perverse incentives – by allowing countries to hide behind parochial national interests. In terms of international environmental law, the international community has attempted to implement variants of this approach for over 40 years, with little success (in terms of achieving environmental sustainability). Although improvements in measurement techniques and data have allowed countries to specify their objectives with increasing detail, the fundamental ‘do what you want’ according to your national circumstances approach has not fundamentally changed.

Advice:

The GATS Agreement allows WTO members to inscribe voluntary trade liberalisation pledges and targets (and limitations to these commitments) in ‘national schedules’ within the Agreement. The schedules conform to a standard format which is intended to facilitate comparative analysis. Commitments can only be withdrawn or modified after the agreement of compensatory adjustments with affected countries, and no withdrawals or modifications may be made until three years after entry into force of the Agreement. Commitments can, however, be added or improved at any time.

Through these schedules, most developing countries made substantial unilateral commitments on market access. Commitments by several of these countries – India, Republic of Korea, Venezuela and Brazil – were comparable to, or even greater than, that of the countries in the Organisation of Economic Cooperation and Development. For other developing countries, the reduction was proportionately smaller, but from a level that was in general higher than in developed countries.

The architects of these negotiations seem to have based their design on the fragile assumption that WTO members, especially high-growth developing countries in East Asia and Latin America, would open their markets to foreign competition to promote their development objectives. While not unreasonable, it does not follow that those countries would ‘lock in’ their commitments in return for effectively no changes in access to First World markets. Therefore, voluntary pledges and targets should be seen only as tools to facilitate greater participation, reconciliation of conflicting economic interests, and transparency; but not necessarily a proxy for equity.

Applied to a climate change context, voluntary pledges and targets might imbue attitudes that action on climate change is voluntary. It may thus dilute the narrative that strong national commitments required to keep global temperatures within 2 degrees, and provide no guarantee that this guardrail will actually be met. These ‘pledge and review’ proposals may even make it easier to decrease ambition (or fall below promised levels of ambition), which could occur with no legal repercussions.

By way of example, Australia could simply continue to assert that it will meet its unconditional 5 per cent emissions reduction commitment when there is no rational basis for claiming to be able to do so – their new Government’s planned Emissions Reduction Fund has a AU$3.2 billion budget over three years, but official modelling claims domestic emissions reductions will cost approximately AU$60-70 per tonne in 2020. This means that auctions will need to clear at around AU$5 per tonne to meet the 594 Mt abatement challenge needed to achieve their 5 per cent target. In short, the numbers are irreconcilable – but Australia can continue to make this claim because if they fail to meet their pledged targets, there will be no legal consequences.