Scaling up Climate-Smart Trade Policies in the Pacific

Vanuatu in the aftermath of Tropical Cyclones Judy and Kevin. March 2023. Credit: UNICEF/Sheenal Sharma

By Sudip Ranjan Basu, Juan Rodrigo and Alexey Kravchenko
BANGKOK, Thailand, Mar 17 2023 (IPS)

The impacts of the climate crisis are acutely felt in the Pacific region. In recent years, the region has been hit by devastating climate events, which cause widespread destruction and significant loss of lives and livelihoods across countries.

These events are a grim reminder of the increasingly severe climate events that are becoming the norm as a result of the changing regional climate patterns in the Pacific small island developing States (PSIDS).

To address climate catastrophes, there is a heightened need in adopting environmentally sustainable practices, including through international trade. In fact, climate-smart trade policies involve incorporating climate concerns into their trade policies.

Climate-smart trade policies are poised to play a catalytic role in enabling the PSIDS to access goods and services that can mitigate climate change. This approach can facilitate the shift towards a more environmentally friendly trade practice.

Harnessing technology for climate-smart strategies

With the growing scale of digitalization of trade processes, there are emerging opportunities to make trade more efficient, and help reduce greenhouse gas emissions (GHG) emissions. However, the digitalization of trade itself can contribute to GHG emissions and so, it’s crucial to ensure a balance between the benefits and drawbacks of digital trade.

To mitigate these impacts, governments are increasingly adopting “climate-smart” trade policies, as highlighted in ESCAP’s 2021 Asia-Pacific Trade and Investment Report, prepared in collaboration with UNCTAD and UNEP.

Governments have been implementing measures such as tariff reductions on renewable energy technologies, digital goods and other less polluting items. In the Pacific, climate smart initiatives such as the Agreement on Trade and Sustainability aims to reduce barriers on the trade of environmental goods as well as eliminating fossil fuel subsidies and encouraging voluntary eco-labelling programs and mechanisms.

At the national level, Samoa suspended import duties on renewable energy materials and Papua New Guinea reduced tariffs on solar equipment imports.

In addition, the digitization of cross-border trade procedures leads to faster clearance times, more transparency and reduced bureaucracy. Implementing digital trade facilitation has the potential for increased competitiveness and reduced GHG emissions.

However, PSIDS have the lowest implementation rate of trade facilitation measures, with limited adoption of paperless trade measures. Only five out of the twelve PSIDS have ratified the WTO Trade Facilitation Agreement, with only Vanuatu having implemented an electronic single window system.

In particular, the implementation of the system in Vanuatu resulted in considerable environmental gains and has led to a 95 per cent decrease in the use of paper, which is equivalent to a reduction of at least 5,827 kg of CO2 emissions and a decrease of 86 per cent in trips between the customs department and the Biosecurity administration.

Furthermore, other Pacific Island States can emulate Tuvalu’s move by joining “The Framework Agreement on Facilitation of Cross-border Paperless Trade in Asia and the Pacific“. This United Nations treaty aims to boost digital trade facilitation measures, thereby hastening trade transaction efficiencies, ultimately reducing emissions, and fostering trade growth.

Preparing the regulatory frameworks

Despite these efforts, only a few countries with the PSIDS have created trade strategies that reflect environmental concerns and climate-smart policies. Tuvalu is an exception, as they, with the help of the Enhanced Integrated Framework (EIF) for Trade Related Assistance for the Least Developed Countries and ESCAP, have incorporated “climate-smart” elements into their national trade development strategy.

The situation is further complicated by persistent digital divides in the region, with low internet penetration rates and high costs of fixed and mobile broadband in many of the smaller PSIDS. The high cost of energy consumption in the telecommunications sector is also a major concern, with energy usage accounting for 20 to 40 percent of telecommunications operating expenses.

As PSIDS work to improve broadband coverage and access, ensuring energy efficiency in the telecommunications sector will become increasingly important for advancing climate-smart and digital trade.

Despite the potential benefits of implementing digital trade facilitation in the Pacific, the implementation rate of trade facilitation measures in PSIDS remains the lowest among other regions, at only 40.1 per cent. There are also considerable policy gaps in the PSIDS in areas related to e-transactions laws, consumer protection, privacy data protection and cybersecurity.

By putting in place these regulations, consumers, producers, and traders can engage in online transactions, while securing sustainable digital trade environment.

Advancing climate-smart and digital trade

Advancing climate-smart and digital trade is crucial for PSIDS. To support this development aspiration, the following policy actions need to be prioritized:

• implement digital & energy policies to democratize digital service access.
• remove tariffs on climate-friendly goods/services including renewable energy & IoT tech.
• develop regulation for cross-border paperless trade and updating their regulatory framework for fostering digital trade.
• reducing reliance on fossil fuels and eliminating fossil fuel subsidies, including those in the fisheries sector.
• green logistics and transportation sectors with reduced costs and zero-emission vessels
• invest in human resources for climate-smart and digital trade.
• integrate climate smart provisions on their trade agreements.

These measures can enhance the PSIDS’ digital and energy infrastructure, competitiveness, efficiency, reduce their reliance on fossil fuels and also be complemented with nature-based solutions, such as riparian zone restoration to enhance carbon sequestration and to mitigate the impact of tidal surges

Readers will find further details and policy recommendations in the report which is now available on the ESCAP website.

Sudip Ranjan Basu is Deputy Head and Senior Economic Affairs Officer; Juan Rodrigo is ESCAP Consultant and Alexey Kravchenko is Economic Affairs Officer.

IPS UN Bureau