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Rich countries are using the green transition as an excuse to boost their own economies at the expense of developing ones, exploiting outdated World Trade Organization rules, according to the UN’s trade chief.
“Many trade rules forbid policies that can be used by developing countries. And the developed countries have more fiscal space to subsidise in the areas that are good for ‘quote, unquote’, the environment,” Rebeca Grynspan, secretary-general of United Nations Conference on Trade and Development, told the Financial Times in an interview.
She said the international trading system, which had allowed states such as South Korea and her native Costa Rica to progress, was no longer working for the poorest.
“Trade and investment have been the two pillars for developing countries to really go on to a path of dynamic growth. And now it will be as important for dynamic, sustainable growth,” she said.
But they now face two big problems, locked out of markets by the fast pace of technological change and new barriers in rich countries.
“The least digitally prepared countries are falling farther behind in digital,” said Grynspan.
“The other problem is that industrial policy is back, but especially in the most developed countries. And so that could affect developing countries’ ability to compete.”
The US has enacted the landmark Inflation Reduction Act with $369bn of subsidies and tax breaks for domestically produced goods such as electric vehicles. The EU has responded in kind with increased subsidies and policies to stimulate production of silicon chips, critical minerals and green technology.
“Developing countries see a lot of these policies as protectionist. They don’t have the fiscal space to go the path of subsidies, so they have to go the path of restrictions to trade or even duties or taxes,” she said.
Grynspan attacked the EU for taking Indonesia to the WTO over its restrictions on nickel exports and requirement to process the ore locally.
She said Jakarta wanted to move up the value chain by making products from the nickel.
“They don’t want it to be exported in the raw form, but with value added. So they were taken to arbitration in the WTO. They lost in the first instance precisely because global trade rules have not been adjusted,” she said.
She said that the Agreement on Trade-Related Investment Measures should be reformed.
Jakarta has appealed but because the US has blocked the formation of a WTO appellate body, the case has stalled. The EU is considering taking enforcement actions such as tariffs on Indonesian goods.
It makes for a “chaotic system” where richer, bigger countries have more power.
She also attacked the EU’s new green rules banning imports from deforested land as too punitive. “If you only punish the population and don’t help them have a sustainable income from a sustainable forest . . . what is the way forward?”
Brussels’s tax on imports of steel, cement and other carbon intensive products, the carbon border adjustment mechanism, was also iniquitous because it was based on developing countries paying the same carbon price as EU ones, she said.
Under the Paris Agreement of 2015 to cut greenhouse gas emissions, countries that had historically emitted more agreed to bear a bigger burden of the costs than developing nations.
“The whole issue of common but differentiated responsibility has been marginalised,” said Grynspan. “Paris is not a restaurant menu that you can choose from. That was an integral part of the deal.”