Climate Change Treaty and Doha Round Top International Agenda

By | November 15, 2009

Climate change and Doha Round agreements remain doubtful, as last minute efforts to construct a deal all parties can accept remain stymied by national priorities. Although negotiations have been continuing, it now seems as if yet more meeting will be necessary.

Both projected agreements are important to the insurance industry. If there’s no climate change agreement, the industry will be faced with a dilemma. Insurers can either continue to write risks in vulnerable areas – seacoasts, flood plains, wooded areas – or withdraw from those markets.

Further opening world trade in financial services would not only provide insurers and brokers with new opportunities, but would also benefit consumers in the markets affected by giving them greater choice and increasing competition.

The Doha Round, aimed at liberalizing world trade, has consumed 8 years of meetings, conferences and protracted negotiations. But, as the theme song of Friends says, it’s still “stuck in second gear.”

The U.S. has said it cannot agree to any deal until other countries make better offers to open their markets to the service sector. It accounts for more than two-thirds of the U.S. economy and almost 30 percent of U.S. exports, which totaled $1.83 trillion in 2008.

“We know that the biggest gains to the global economy are likely to derive from multilateral services liberalization, but the offers on the table right now fail to deliver on that promise,” U.S. Trade Representative Ron Kirk said, as reported by Reuters, at the Global Services Summit. “We have said flat-out that there will be no deal without a solid result on services which would result in new markets.”

The original goal was to sign a new global commerce deal in 2010, but that target now appears out of reach unless countries accelerate their negotiations, according to the World Trade Organization’s Director-General Pascal Lamy. “We have not yet seen tangible progress in the negotiations and, overall, I would say that the current speed with which we are advancing is too slow to be in a position to wrap up this round next year.”

At a recent meeting of all 153 WTO members he urged them to turn vague discussions into real negotiations with concrete proposals laid down on paper. Although some progress has been made, the talks are stalled over differences between exporters and importers, and rich and poor countries on how much to cut farm subsidies and industrial and agricultural tariffs, as well as the U.S. and EU demands to open up markets for financial services, telecommunications and others.

Negotiations on a new agreement to curb greenhouse gasses, which would supersede the Kyoto Protocol, may have become even more intractable, despite the fact that a failure may produce even more dire consequences.

Those are coming in for increased study. Catastrophe modeling firm AIR Worldwide has teamed up with the UK’s Met Office on a project sponsored by the Association of British Insurers (ABI) to examine the financial implications of climate change to the insurance industry.

Nick Starling, the ABI’s director of General Insurance and Health, noted that “while there is significant uncertainty associated with the future of earth’s climate, due diligence requires that we explore the possible financial impacts of rising global temperatures, thus allowing stakeholders to make rational decisions about if and when to take action.” The study will examine the effects of a “changing climate on insured risks from two dominant natural hazards in the U.K. — namely, inland flooding and winter windstorms — and from typhoon activity in China, accounting for some of the uncertainties surrounding the impacts of climate.”

Harping on the uncertainties certainly hasn’t help move climate negotiations along. On Nov. 6 Australian Prime Minister Kevin Rudd, as reported by Reuters, lashed out at climate skeptics, identifying them as a vocal minority that is powerful enough to threaten a global deal at next month’s Copenhagen climate summit. “They are a minority. They are powerful, and invariably they are driven by vested interests,” Rudd said in a foreign policy speech.

The cynics may be slowing the process, but the sheer complexity of reaching an agreement has made it unlikely that all of the details in a binding treaty can be reached in Copenhagen. “The clock has almost ticked down to zero,” Yvo de Boer, head of the U.N. Climate Change Secretariat, told officials from 175 nations at the opening of the Nov. 2-6 talks in Barcelona.

The talks were supposed to put the finishing touches on a deal, but, despite what de Boer described as a “huge desire” for success, no clear decisions were reached at the meeting. He identified four key elements on which an agreement depends: individual cuts in emissions for rich nations; actions by poor nations to slow their rising emissions; new finance and technology for developing nations and a system to oversee funds.

But reaching the compromises required to agree on the details of the treaty in the midst of a global recession appears to have been too daunting. Reuters reported that the Barcelona negotiations had gotten bogged down with disputes between rich and poor including a day-long boycott by African nations who accused the rich of failing to set themselves deep enough 2020 goals for curbing greenhouse gas emissions.

The consensus now seems to be that, while some agreement may emerge from Copenhagen, it will probably take at least another year to iron out all of the details.

Topics USA Climate Change

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