Climate change threatens brittle global trading system

Significance

With the WTO in gridlock, major powers are advancing competing policy solutions that threaten to contravene trade agreements and impede global cooperation. The EU remains committed to carbon pricing; a newly invigorated US effort is departing from it.

Impacts

• The WTO’s Appellate Body has had too few judges to make rulings since 2019; progress on reviving it needs US and Chinese agreement.
• The Appellate Body stalemate will require economies to manage trade disputes on an ad hoc basis; this could intensify disputes.
• Adding to firms’ compliance requirements, policies will vary on whether trade liberalisation or restriction is better for decarbonisation.
• Political momentum is building for more aggressive responses to climate change, but global cooperation is lagging behind.