An environmentally sustainable future for trade
G20 Summit

An environmentally sustainable future for trade

There is a strengthening link between trade and the environment, and customs has the capacity to be a key contributor to a better, more sustainable future

The global mindset on climate change and environmental issues has shifted significantly. As recognition of their criticality has grown, global trade is increasingly becoming part of the debate and seen as a priority for sustainably focused changes. As a result, the number and range of environmental policies involving international trade, and therefore customs authorities, will also inevitably increase.

Promoting the circular economy, addressing embodied carbon – the carbon emitted throughout the lifecycle of a  product from extraction of raw materials to disposal – in traded goods, negotiating and implementing new multilateral environmental agreements, and embedding environmental policy in trade agreements are all part of the policy mix currently being proposed, making the link between trade and the environment abundantly clear. Customs is typically on the frontline of implementing such measures, responsible for ensuring that what is on paper is translated into reality at the borders.

Environmental policies

Customs has a long history of involvement with environmental border measures, with border regulations deriving from the various multilateral environmental agreements serving as a prime example. The objectives of these agreements are wide-ranging (hazardous waste, ozone-depleting substances and substances with high global warming potential, endangered species, persistent organic pollutants, and so on), but they broadly focus on stopping illicit trade and monitoring and regulating legal trade.

To maximise their effectiveness, provisions related to trade measures envisaged in MEAs or national environmental policies should involve a range of identification, compliance, facilitation and enforcement measures. These work best when applied as part of an integrated strategy agreed between the competent authorities, including customs and any other relevant border agencies.

For policies concerning goods that are traded across international borders, early cooperation between policymakers and customs can be highly beneficial. Customs can assist in developing ways of identifying the relevant goods more effectively at the border, optimising the implementability of agreements and increasing the likelihood that all aspects crucial to real-world success are covered in the development of environmental policy. It gives environmental policymakers access to a full understanding of the mechanisms by which customs applies regulatory frameworks, the key tools used by customs and of how these mechanisms can affect policy outcomes. This can greatly increase the effectiveness of the agreements and sets a strong basis for efficient implementation.

Early consideration is vital

The Harmonized System, a key instrument for customs and trade managed by the World Customs Organization, deserves a specific mention.

Having HS codes that specifically identify classes of goods of interest not only provides global statistics, but also greatly facilitates governments that choose to implement policies on the trade of those goods. Governments can introduce change proposals for the HS codes, but it is not a quick process. Missing negotiation deadlines for a review cycle can result in a five-year delay in terms of implementation. (The WCO has recently published a guidance note to clarify the process for proposing changes to the HS.) Good timing is part of the effectiveness of a measure, especially for environmental measures, so early consideration is vital.

Furthermore, to be effective, a change introduced in the HS needs to be paired with compliance measures. Customs enforcement measures aim at preventing illicit trade in environmentally damaging goods and thus are critical in this respect. HS measures are only a part of the package of actions needed from customs administrations to support environmental policies.

To this end, policymakers can count on the WCO and its members to discuss: the potential impact of an environmental policy at the border and on how environmentally sensitive goods are currently traded and processed; trade measures that could serve as workable strategies to achieve precise policy goals; what provisions could usefully be included in the relevant agreements to ensure the consistent implementation of effective compliance, facilitation or enforcement measures by customs; and the HS or other customs matters at the WCO to assist in meeting agreed schedules for implementing agreements.

Delivering targeted impact

G20 leaders should consider the value of involving customs as early as possible in the discussions while developing environmental policies, so as to increase awareness of the best ways to generate the targeted impact at the implementation level and to ensure that the full potential of customs tools is harnessed for the benefit of all.