Four ways for low-income countries to leverage trade for climate action

International trade can be a powerful catalyst for green, resilient, and inclusive development, especially in a world increasingly shaped by the impacts of climate change. For low-income countries (LICs), leveraging international trade offers both significant opportunities and complex challenges amidst climate change. The evolving landscape demands innovative strategies and coordinated efforts to maximise the potential of trade as a tool for climate action.

Recent discussions at global forums like the WTO Ministerial Meeting (MC13) and COP28 have underscored the necessity of a multilateral approach. The Coalition of Trade Ministers on Climate is uniquely positioned to integrate the nexus of trade and climate within international institutions. This blog summarises four strategic actions from our recent policy brief that LICs might advocate for to enhance coordination and effectiveness in addressing climate change through trade.

1. Advocating for a formal WTO work programme on trade and climate

Developing effective policies for climate-resilient international trade requires in-depth and up-to-date knowledge about the complex relationship between economic development and climate change. LICs can propose launching a formal work programme within the WTO to institutionalise discussions on these issues. Programme points could include:

• Building green competitiveness and overcoming constraints: Strategies to develop modern, green value chains while addressing financial and technological barriers in transitioning to low-carbon economies.
• Developing carbon markets and harmonising measurements: Creating regional and global carbon markets to incentivise emission reductions and establishing internationally agreed methods for measuring carbon content in exports.
• Addressing market access concerns: Integrating LICs' concerns about environmental measures that may limit market access into formal WTO discussions.

2. Reconciling development objectives with climate action

Balancing economic development with climate change mitigation is crucial. The WTO can foster discussions aimed at aligning ambitious environmental goals with an open, rules-based trading system that supports sustained economic growth. LICs need to advocate for a coordinated approach that avoids unilateralism and green protectionism, including:

• Promoting trade in environmental goods and facilitating technology transfer: Reducing barriers to trade in green technologies and enabling the sharing of environmental technologies between countries.
• Extending preferential treatment and harmonising policies: Offering trade preferences for green goods under existing WTO regimes and creating consistent regulations to support sustainable practices globally.
• Aligning compliance with development paths: Evaluating regulatory trade-offs to balance stringency with necessary flexibility, ensuring that LICs can meet environmental standards without hindering growth.
• Developing standards and cooperation: Establishing frameworks for carbon tracing and collaborating on international standards for net-zero carbon products to ease cross-border trade.

3. Forming regional coalitions of trade ministers on climate change

In global trade discussions, the voices of LICs are often overshadowed by larger economies. Forming regional coalitions can amplify their influence and ensure their specific concerns are addressed. By presenting unified positions, regional groups can more effectively advocate for policies that consider the unique challenges and opportunities facing LICs. These regional coalitions could serve to expand:

• Knowledge sharing: Exchanging information on trade and climate issues specific to their economies.
• Strengthening bargaining power: Coordinating positions to enhance influence in negotiations with larger economies.
• Contributing to international fora: Actively participating in events like WTO Ministerial Conferences, COPs, and regional trade agreements such as AfCFTA.

4. Linking "Aid-for-Trade" initiatives to green development practices

Aligning "Aid-for-Trade" initiatives with the development of green trade capacities is crucial for LICs to not be left behind in the transition to a sustainable global economy. By leveraging these programmes, LICs can adopt environmentally sustainable practices while integrating into the global trading system. This could support:

• Innovative financial mechanisms: Implementing incentives to support investments in green technologies and sustainable practices.
• Capacity building for sustainable practices: Enhancing skills related to sustainable agriculture, renewable energy, and green manufacturing.
• Facilitating technology transfer: Encouraging the sharing of green technologies and best practices.
• Establishing impact assessment frameworks: Evaluating environmental and economic outcomes to ensure aid contributes effectively to trade development and climate resilience.

The IGC is working together with local governments in supporting their domestic agenda to leverage trade towards fostering climate change resilience, mitigation of emissions and fostering green industrialisation. A more coordinated regional and international approach, based on concrete and actionable steps, addresses ongoing international discussion and will lead the way to more integrated and effective ways to tackle the impact of climate change.