In January 2024, the Remaking the Global Trading System for a Sustainable Future Project, an advocacy organization led by university professors around the world, released the Villars Framework 2.0,[1] which details potential reforms the World Trade Organization can implement to bring the international trading system into harmony with a global “commitment to a sustainable future.”[2] This post explores how a such a revamped trade system could catalyze progress towards the international community’s climate goals.

Much current scrutiny of the detrimental effect of international trade on the global climate agenda centers on the World Trade Organization’s tendency to prioritize economic gain over environmental protection.[3]  The Villars Framework is a pioneering effort to integrate environmental sustainability into the core of international trade agreements and organizations.[4] The Framework hopes to reinvent the trading system as a vehicle for both economic growth and environmental sustainability by aligning the trade system with global climate commitments,[5] encouraging green technology innovation and implementation of sustainable resource management,[6] and promoting a just transition mindful of its impacts on developing countries and disadvantaged peoples.[7]

Remaking trade for a sustainable future requires several strategic adjustments. First, trade agreements should include binding environmental standards holding nations to their own net-zero emissions target commitments undertaken in Paris and Glasgow.[8] Such provisions represent a shift towards making trade privileges contingent on sustainability practices, promoting climate accountability in international trade.[9] Requiring nations to abide by their commitments in order to access the international market leverages the global market to promote stronger climate consciousness.

Second, the international community should use the trade system to accelerate the adoption of green technologies and reimagine resource management in a sustainable way. For instance, countries should lower tariffs on the importation of renewable energy technologies, or encourage research and development in sustainable technology through subsidy incentives. While current “WTO rules [don’t] provide any basis to distinguish between one type of subsidy and another,”[10] it would be helpful to draw a line: some subsidies benefit sustainability, and others impair it. The trade system must acknowledge that divide and put it to good use by punishing harmful subsidies and actively permitting those that increase the global stock of natural resources such as clean air. Permitting each nation to go about its accomplishment of these goals in its own way, but developing mechanisms for interoperability of each nation’s policies, will result in a trade system promoting a greener global community.

Third, successful implementation of the framework requires efforts to ensure a just transition for developing nations. Several tools are available to address such equitable concerns. For example, the EU has recently begun implementation of its Carbon Border Adjustment Mechanism (CBAM), which taxes imports of carbon-intensive goods to discourage carbon leakage to countries that do not price carbon.[11] Villars posits that further tailoring of a Border Carbon Adjustment like the EU’s would be required to be internationationally equitable.[12] This could take the shape of a carbon tax or a cap-and-trade system that forces businesses to internalize the costs of their carbon emissions,[13] with proceeds used for climate change management in the exporting country.[14] The framework also suggests that certain developing nations should be exempt from the international standards altogether, in accordance with the Paris Agreement, or that they should otherwise receive “substantially increased technical assistance” to meet these standards.[15] We cannot improve the international trade system without understanding and adjusting for reality. That includes the simple truth that less-developed countries and small-island developing states did not cause the link between trade and climate change and thus require assistance in the system’s transition.

Although the Villars Framework’s potential to transform trade is immense, its implementation faces significant challenges. Not only do large international businesses benefit from the status quo, but in some cases, it may be almost impossible to effectively monitor their compliance with the standards Villars hopes to create.[16] Objecting businesses may further represent a roadblock to enacting changes to realize the framework’s goals in the first place. Moreover, there is an immense complexity inherent in negotiating trade agreements that satisfy both economic and environmental objectives.[17]

Still, the opportunities presented by the Villars Framework outweigh its implementation challenges. The international community has been gifted a clear and actionable roadmap for aligning trade and environmental policies. Using its proposals, leaders can harness the power of the global economy to combat climate change and its effects while spurring innovation and adoption of green technologies, creating new jobs in sustainable industries across the globe, and generating healthier ecosystems. Each of these possibilities contributes to a healthier environmental future than that which previous generations left us. As the fact sets in for businesses and nations that we must grapple with our new climate reality, the Villars Framework just might be the puzzle piece that saves the international economy from destroying itself and the planet with it.

[1] Remaking Trade Proj., Villars Framework for a Sustainable Global Trade System, Version 2.0 (2024) [hereinafter Villars Framework 2.0], https://remakingtradeproject.org/villars-framework.

[2] Remaking the Global Trading System for a Sustainable Future Project, https://remakingtradeproject.org/about (last visited Feb. 27, 2024).

[3] Thiago Kanashiro Uehara & Kate O’Reilly, Trade Policy and Sustainability, Trad, Dev., & Env’t. Hub, Jan. 2023, at 2, https://tradehub.earth/wp-content/uploads/2023/12/Kanashiro-Uehara-and-OReilly-Trade-policy-and-sustainability.pdf  (“Alongside economic growth, the expansion of trade…also underpins systems of production and consumption known to be unsustainable.”).

[4] See Villars Framework 2.0, supra note 1, at 2-3.

[5] Id. at 27-32.

[6] See id. at 32-36.

[7] See id. at 36-37.

[8] Id. at 31-32. See also Paris Agreement to the United Nations Framework Convention on Climate Change, Dec. 12, 2015, T.I.A.S. No. 16-1104; Glasgow Climate Pact of the United Nations Climate Change Conference, Nov. 13, 2021, advance version available at https://unfccc.int/sites/default/files/resource/cma2021_10_add1_adv.pdf.

[9] Villars Framework 2.0, supra note 1, at 32.

[10] Jennifer Hillman & Inu Manak, Rethinking International Rules on Subsidies, Council on Foreign Rel., Special Rep. No. 96 at 15 (2023).

[11] See generally Joel Trachtman & Jan Yves Remy, The EU’s Carbon Border Tax is a Blow to Climate Justice. Here’s How to Fix It, Reuters (2023).

[12] Id.

[13] Villars Framework 2.0, supra note 1, at 35-36.

[14] Id.; Villars Framework 2.0, supra note 1, at 36.

[15] Id. at 37.

[16] See generally U.S. CBP, Off. of Int’l. Trade, Importer Self-Assessment Handbook, https://www.cbp.gov/sites/default/files/documents/isa_hb_3.pdf (last updated Jun. 2011) (demonstrating the arduous process of self-assessment that new standards would make even longer and more costly).

[17] See Andrew Rose & Christoph Moser, Why do trade negotiations take so long?, CEPR, Vox EU, Jun. 2012, https://cepr.org/voxeu/columns/why-do-trade-negotiations-take-so-long.