This new UNCTAD publication TRADE AGREEMENTS, PETROLEUM AND ENERGY POLICIES analyses the interface between energy policies and trade agreements. It is particularly timely in the present context of dramatic oil price hikes, debates on energy taxes, environmental concerns relating to the use of fossil fuels and proposals for a comprehensive new round of multilateral trade negotiations. It addresses the wishes of petroleum-producing developing countries to use their natural energy resources effectively in order to promote development and competitiveness in the face of globalization, while at the same time improving market access for their exports of petroleum and petroleum products. It asks:
- What are the potential constraints that WTO membership might impose on the policy options of the petroleum-exporting developing countries? What possibilities are open to these countries to defend their interests within the WTO framework?
- What exactly is on the evolving international trade agenda, and how is that agenda relevant for trade in petroleum and petroleum products?
- How will the Climate Change Convention and Kyoto Protocol affect the energy policies of developed countries? Will they lead to more emphasis on alternative sources of energy, and if so, what will that mean for the export prospects of the oil-producing developing countries?
- What are the implications of the inclusion of energy in regional agreements for future multilateral and regional negotiations?
The book looks closely at the following points:
Energy policy to stimulate industrialization and global competitiveness:
"Dual pricing" practices for natural resources, whereby governments keep domestic prices lower (or export prices higher) than if they had been determined by market forces, are used by oil producers to promote industrialization by attracting investment and supporting the competitiveness of their industrial sector. While dual pricing as such is not inconsistent with WTO rules and has not yet given rise to major trade problems, it is increasingly likely to come under scrutiny if oil prices continue their upward trend.
On taxation of energy products:
OPEC leaders met last September - only the second such meeting in history - and expressed their concern at the high level of consumption and excise taxes imposed on petroleum products in the consuming countries. They also called for lower taxes that would both benefit consumers and promote sustainable world economic growth. They are worried that high taxes undermine their ability to derive income from their own natural resources. As these taxes are imposed in a non-discriminatory manner on imports and domestic production, they are not inconsistent with WTO rules. However, different energy products - e.g. coal and petroleum - are often faced with radically differing tax burdens. It is not inconceivable that such taxes could be the subject of negotiated trade concessions (a precedent exists in the Tokyo Round negotiations on tropical products). Similarly, new proposals have been made for extending multilateral trade obligations further into the realm of domestic policy. This could include the reduction of fuel excise taxes in future WTO negotiations. At issue is what such additions to the negotiating topics would mean for the oil exporters.
On extending liberalization to energy services:
The General Agreement on Trade in Services (GATS) provides a framework for the negotiation of liberalization commitments in all services sectors, including energy services (such as pipeline and maritime transport, foreign investment in oilfield services or distribution of gasoline, the entry of foreigners to provide exploration and other oilfield services, or the studies abroad of future petroleum engineers). The largest energy services trading partners - the United States and the European Union - are likely to pursue further liberalization in the sector in order to open new markets to their domestic firms. What strategies can their developing country partners follow to maximize the benefits of liberalization while strengthening the capacities and international competitiveness of their energy services sectors?
On environmental concerns:
"Green trade" is one of the highest-profile issues in contemporary trade policy, and particularly in energy and allied sectors, which are often identified as among the leading contributors to such environmental problems as oil spills, global warming and potential nuclear disasters. Environmental measures have been used to discriminate against imports from petroleum-exporting countries, but these countries have successfully used the WTO dispute settlement mechanism to defend their rights. However, the biggest challenge to petroleum-exporting countries in the area of environmental measures today probably arises from the international community´s decision to negotiate the United Nations Framework Convention on Climate Change and the Kyoto Protocol. The Protocol is the first multilateral instrument to contain legally binding obligations to reduce greenhouse gas emissions. It also provides for the possibility of using emissions trading between countries and a range of other flexible mechanisms as valid tools to achieve reductions, for example through carbon/energy taxes. The remaining obstacles to its ratification are expected to be ironed out at the sixth meeting of the Conference of the Parties to the Convention, which opens in The Hague on 13 November. What impact will it have on the demand for oil?
On regional agreements:
One insight into the possible future agenda for negotiations relating to energy issues and petroleum in particular can be gleaned from an examination of how these issues have been treated at the regional level. In many cases, the approaches taken in regional agreements have found their way to the multilateral stage. The North American Free Trade Agreement (NAFTA), for instance, is based on the so-called "GATT-plus" approach in the energy sector, since it interprets GATT principles in such a manner as to introduce new obligations.
On US energy policy:
The United States is viewed as being the most likely proponent of initiatives to include new rules in the trade system affecting energy policies and international trade. However, the goals of US negotiators are complicated by the sometimes complementary and sometimes competing demands of three distinct areas in national policy: economics (which entails both export promotion and access to raw materials); security (the US needs reliable supplies of strategic goods, but has conflicts with some oil-rich States); and environmental protection. While the US is often seen as a net energy importer, its dependence on foreign sources of hydrocarbons is counterbalanced by its status as an exporter of goods, services and capital used in the production of energy. How will these realities be reflected in multilateral or regional trade negotiations?
