Brussels, 29/10/2009 (Agence Europe) - Twice in the course of his term of office, Peter Mandelson, Catherine Ashton's predecessor in the post of Trade Commissioner, publicly raised the issue of energy in trade policy. At a conference on external energy policy in Brussels in December 2006, and in a speech on globalisation and free trade in Cambridge in February 2008, Mandelson, who is currently UK Enterprise Minister, argued for international rules in the field of energy to be strengthened, with the WTO being, in his opinion, the appropriate platform for governing future energy investment and trade (see EUROPE 9311 and 9598). In so doing, the then European Commissioner had called, on behalf of the EU, for free access to energy resources.
Should trade in energy products, principally oil and gas, be subject to WTO rules? Should any energy trade disputes be subject to arbitration by the disputes settlement body of the WTO, the multilateral body which governs world trade? These questions were debated at a conference, “Energy, Trade and World Governance” at WTO headquarters in Geneva on 22-23 October. They are very much difficulties of the moment, in the uncertain world context, in terms of the surge in prices, supply security and climate change. Furthermore, trade in energy goods has never been part of any previous WTO negotiating rounds, or been included in the agenda of the Doha Round for Development. This is largely because the Singapore issues, including investment were excluded from Doha negotiations in 2003, under pressure from developing countries.
The high point of the debate to consider how to bring energy trade within the framework of global governance - the speech by WTO Director General Pascal Lamy - was unequivocal. “The WTO and the world of energy are parallel universes and should forever remain so. Far from it. The culture of international trade cooperation that defines the WTO - and many of the rules underpinning it - is actually and potentially relevant to energy in several sorts of ways,” he said. Underpinning his reflections, Lamy noted that world energy reserves were concentrated in a few geographical areas and that producer countries could limit supply to the market. Setting production quotas, as does OPEC, the supplier of 40% of world needs, does not encourage competition or provide a favourable framework for the necessary foreign investment to ensure supply. Lamy also noted that the majority of world oil and gas reserves were countries which, with the exception of Saudi Arabia, were not WTO members, countries such as Russia, Kazakhstan, Azerbaijan, Algeria and others.
In Lamy's view, the purpose of the WTO, its existing structure and the content of some of its rules are directly relevant to the energy sector. He would also argue that natural extensions of existing rules could be relevant to the sector. The WTO did not, he said, address energy as a distinct sector. In a broad sense, the purpose and framework of the WTO is applicable to all trade, he said, noting that non-discrimination, transparency, an explicit structure of rules that provides predictability and reduces circumstances, greater openness over time and a mechanism for settling disputes constitute the foundations of the system. Taking that as the starting point, a number of specific rules are particularly relevant and, just like any sector where trade is feasible, obstacles to trade are equally feasible, Lamy said, pointing out that the WTO had something to say on each of these, relevant in the area of energy, such as subsidies that distort trade, state trading disciplines, transit rights for transporting energy, and export restrictions. In the field of services, he stated the WTO had established a framework of cooperation that includes services incidental to the extraction of oil and gas, services incidental to energy distribution and pipeline transportation of fuels. But there were obvious questions which remained to be answered, Lamy said, pointing out that “more and more questions in the area of energy relate to competition and investment policy, on which the WTO has presently little or no say”. This included export taxes, on which three are no disciplines, the head of the WTO regretted.
Pascal Lamy also highlighted the relevance of the WTO concerning the trade in energy in the current global objective of combating climate change and developing alternative energy sources. In his view, the WTO should be involved in the possible use of trade measures to manage leakage or competitiveness concerns arising from the costs of carbon constraints on production. There is no doubt “that energy is of fundamental importance to every economy in the world”, said Mr Lamy, adding that, as greenhouse gas is emitted with the use of energy, this has direct consequences on climate change. He said: “The core question I refer to is whether we need a new, more comprehensive global governance in energy”. Luzius Wasescha, Ambassador for Switzerland, considered oil and gas are goods and their transport a service, describing them as “themes of the future par excellence”. (E.H./transl.rt/jl)