The Trade Pillar of the Bridgetown Initiative

The Bridgetown Agenda 2.0 (BA 2.0) and the outcomes of the Summit for a New Global Financial Pact in Paris (Paris Pact) – while being primarily focused on reform of the global financial system and architecture – demonstrate the interconnectedness between finance, trade and investment to support climate change adaptation and mitigation goals.

The countries of the Global South cannot make the much-needed investments in green resilient technologies, participate in green global value chains or leverage the benefits of a global trading system if they are not able to direct the requisite public and private capital and finance flows inwardly. Not only has the cost and availability of capital been a constraint, but uncertainty persists on where the entry points for leverage exist, and how existing programmes can be better coordinated.

BA 2.0, the successor to the Bridgetown Agenda, expands and strengthens the call for finance and trade to work together to support the just transition and the shift towards low-carbon, resilient economies in the Global South. Specifically, BA 2.0 lists among its six action items the creation of an international trade system that supports global green and just transformations through resilient supply chains that benefit countries that possess raw materials. There has been further elaboration in the Paris Pact signed by Heads of State to promote technology transfers as well as a focus on local economic value added and transformation.

The World Trade Organization (WTO) plays a central role in facilitating the shift towards greener trade within the global trading system. Recent initiatives include the Trade and Environmental Sustainability Structured Discussions(TESSD), the Plastics Dialogues and Action on Climate and Trade (ACT). The EU has engaged the WTO Trade and Environment Committee in view of the effects of legislation to support its Green Deal, related to border carbon adjustments (BCAs). Collectively, along with initiatives by academia and civil society, including remaking the global trading system for a sustainable future, there is a growing focus on the intersections between trade, climate and the broader sustainability agenda.

Recognising the need for greater institutional collaboration, the WTO Secretariat and UNFCCC have designated a dedicated trade day at COP28, promoting coherent policy-making at both domestic and international levels. This approach should also translate into greater opportunities for joint programming by development partners that provide trade-related technical assistance and climate finance. For example, the operationalisation of National Adaptation Plans and Nationally Determined Contributions submitted as part of the Paris Agreement under the UNFCCC must involve greater trade mainstreaming. This is recognised by the WTO, working with the World Bank and World Economic Forum on ACT.

Technology Needs Assessments submitted to the UNFCCC by developing countries also require dedicated WTO discussions on technology transfers – an aspect the TESSD has yet to engage with. A more proactive approach is needed to address the lack of equivalence on standards, carbon initiatives and pricing mechanisms and unilateral attempts by countries to introduce measures to promote their environmental objectives, whether through BCAs or green subsidies that promote certain countries and sectors at the expense of others. Developing countries’ interests – including accessing carbon markets and necessary technologies and promoting products and services in which they have comparative advantages – are not being reflected in the current global trade and climate discourse driven by the major economic powers. These are all areas where the WTO has a pivotal role to play in delivering equitable outcomes for all.

Considerations for the Africa Climate Summit and beyond

The Africa Climate Summit (ACS), to be held in Nairobi, Kenya, from 4–6 September, presents a continent-wide approach to harness the broad support for transformative change of development finance, as reflected by the goals of the Paris Pact and the Bridgetown 2.0 Agenda. It seeks to shift the emphasis towards the real economy and to identify investment opportunities arising from actions to address climate change, especially in Africa.

The ACS will focus on the following key areas: adaptation, renewable energy, sustainable agriculture and climate finance. While there is currently no specific international trade dimension to the ACS, it is hard to see how any of these objectives can be achieved without close coordination with trade and investment policies. This is clear if we reflect on examples like Kenya’s efforts to develop its geothermal and carbon capture and storage potential – which requires investment, but also clarity on the rules regarding international carbon markets and trade.

Unlocking the finance to support investments requires commensurate action to address trade barriers, including those related to weak compliance infrastructure. Specific issues for Africa and its private sector include how to be better positioned to gain more value in chains of production that involve critical minerals, which are key inputs into new green technologies. These aspects are specifically referred to in BA 2.0.

The accompanying frameworks, compliance infrastructure (for measuring and verifying green credentials, etc.) and enabling business environment are all necessary to reap the benefits of the new green economy. The African Continental Free Trade Area (AfCFTA) which seeks to reorientate productive structures and boost intra-African value chains, must consider these emerging dynamics. Trade-related technical assistance and existing support programmes to facilitate Africa’s economic transformation must adapt, as called for within BA 2.0.